Federated Department Stores Inc. (Cincinnati) said because a deal to sell its Fingerhut online marketing and catalog unit to an investor group led by turnaround specialist Peter Lytle has not yet been finalized, it would begin seeking buyers for individual parts of the business.
Federated vice chairman Ronald Tysoe said while no other parties interested in buying Fingerhut as a going concern have emerged since January, a number of parties have expressed interest in purchasing parts of the Fingerhut operation.
“We have delayed doing so until it could be determined if a sale of the entire business as a going concern would be possible,” Tysoe said. “But we can't keep these parties on hold indefinitely. It also is not fair to the Fingerhut organization to prolong the uncertainty with which they have been living.”
Federated said it would continue to work with Lytle's Business Development Group Acquisitions Inc. (BDGA) of Wayzata, Minn., while it shopped Fingerhut's assets to other potential buyers. The two parties signed a non-binding letter of intent on the deal on Feb. 21.
“While we still hope to be able to conclude this transaction, we understand Federated's need to explore alternative sale scenarios for the Fingerhut assets,” Lytle said.
In addition to its core Internet and catalog businesses, Fingerhut also operates catalog subsidiaries Arizona Mail Order, Figi's and the Popular Club.
Because the deal with BDGA has not been consummated, Federated said it will begin laying off about 3300 of Fingerhut's 3700 workers by April 5. However, if the purchase by BDGA is completed, Lytle said he believes his company would be able to rehire many of the workers.
But even if Lytle does buy Fingerhut, the layoffs — 3000 of them in Minnesota — will occur before a deal could be closed because it would take more than 30 days to close an agreement.
Fingerhut grew into one of the largest catalog retailers in the country with nearly $2 billion in annual sales. By the late 1990s, Fingerhut also had become an aggressive developer of Web retail sites. Federated, owner of department store chains Bloomingdale's and Macy's, bought Fingerhut 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.
Federated said it expects to get between $1.1 billion and $1.3 billion after taxes for Fingerhut's assets over the next four years.