Broken Fingerhut Talks

Federated Department Stores (Cincinnati) announced that negotiations to sell its Fingerhut direct-sales subsidiary to Business Development Group Acquisitions (Wayzata, Minn.) have been terminated. The parties said a combination of factors, including a difficult economic environment for acquisition financing, led to the decision not to proceed.

“Both parties have worked intensely and tirelessly over the past three months in an attempt to successfully conclude this very complicated transaction, but because of a number of external factors, including regulatory and rating agency issues impacting the structure of a potential deal, we unfortunately have had to mutually agree that it just isn't going to happen,” said Federated vice chairman Ron Tysoe. “Therefore, Federated is going to pursue the potential sale of individual Fingerhut assets to third parties, with an emphasis on preserving as many jobs as possible in that process. We also will be proceeding with the wind down of the Fingerhut catalog operation over the next 30 days.”

Tysoe said that no other potential buyers interested in acquiring Fingerhut have been identified since Federated's announcement in January that it intended to dispose of the operation. He added that Federated still expects to sell catalog subsidiaries Arizona Mail Order, Figi's and Popular Club as going concerns.

Federated bought Fingerhut — a successful catalog and Internet retailer — in March 1999 for $1.7 billion, in hopes of jump-starting its own direct-to-customer sales business. But the business soured as capital dried up for Internet ventures and debt problems grew among Fingerhut's customers.