FAO Schwarz Catalog Makes a Comeback

New York-based FAO Schwarz is planning a major fall catalog drop — the toys cataloger’s first mailing since its purchase in January by private equity firm D.E. Shaw Group. The legendary toy company is expected to mail an estimated 4 million copies at the end of the month.

Founded in 1870 as a Manhattan toy store, FAO Schwarz had stumbled in recent years. In December 2003 its former parent company, FAO, had filed for Chapter 11 bankruptcy protection for the second time in less than a year. New York-based D.E. Shaw paid $20 million for Schwarz’s catalog and online operations, its flagship store on New York’s Fifth Avenue, and a store in Las Vegas. The two stores are currently closed and being remodeled prior to reopening this fall.

FAO Schwarz is no longer D.E. Shaw’s only toys property. On May 11 a subsidiary of the investment firm, D.E. Shaw Laminar Portfolios, acquired the online assets of KB Toys, which itself had acquired the assets of eToys at auction in 2001. Shaw paid $7.4 million in cash plus a $500,000 royalty payment for three years to KB Toys; the assets include the inventory, the equipment leases, and the proprietary technology of KB Online Holdings. Per its licensing agreement, the new Denver-based company, called eToys Direct, will operate the KB Toys.com Website.

And eToys Direct has already made an acquisition of its own. In June it bought assets of Englewood, CO-based doll cataloger My Twinn for $1.06 million. My Twinn had abruptly ceased operations a week before Christmas 2003, filing for Chapter 7 liquidation on Dec. 19. My Twinn specialized in creating dolls personalized to resemble “the special child in your life.”

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