ACQUISITIONS: Lillian Vernon buys Rue de France

Apr 01, 2000 10:30 PM  By

After more than 49 years in the catalog business, Rye, NY-based Lillian Vernon Corp. is making its first-ever acquisition. On Feb. 21, the gifts and home goods cataloger signed a letter of intent to acquire the assets of home decor cataloger Rue de France, which has estimated annual sales of $5 million-$6 million.

The transaction was expected to close by the end of May. Terms of the deal were not disclosed. Rue de France founder/president Pamela Kelley will join Lillian Vernon as president of the newly formed subsidiary that is acquiring her catalog’s assets, and Lillian Vernon spokesman David Hochberg says Rue de France will likely keep its Newport, RI, headquarters.

The deal is part of Lillian Vernon’s efforts to broaden its market. “Rue de France has a more upscale customer base, and we found that the cataloger would be a good addition to our business,” Hochberg says.

With 26,200 12-month buyers, Rue de France targets women 36-55 years old. Selling upscale decorative merchandise such as European lace curtains, the catalog has an average order of $180. By comparison, the average age of Lillian Vernon’s 2.9 million 12-month buyers is 47 years old, and its average order is $55. The $255.2 million Lillian Vernon mails eight titles of moderate-priced gifts and decorative items, including Lilly’s Kids, Christmas Memories, and Neat Ideas.

For the 15-year-old Rue de France, being owned by Lillian Vernon “will certainly allow me to mail more,” Kelley says. “And it’s possible we’ll be able to save on paper and postage by way of Lillian’s volume discounts, but we really haven’t begun to explore that at this point.”

But despite apparent synergies, merging two businesses can be problematic, says Ken Gassman, an analyst with Richmond, VA-based investment banking firm Davenport & Co. Conflicting infrastructures, procedures, and corporate environments must be resolved. “The question is how successful Lillian Vernon will be in assimilating the new business with its own,” Gassman says. “Absorbing the new business can take longer and cost much more than imagined.”

But he adds that by leaving Rue de France in Rhode Island, rather moving it to New York, the cataloger is off to a good start.