The Union of Needletrades Industrial and Textile Employees (UNITE) plans to hold a rally on April 5 in front of Federated Department Stores’ headquarters in Cincinnati to protest Federated’s plan, announced last week, to lay off 3,300 Fingerhut workers that day. UNITE represents more than 1,000 Fingerhut workers in Minnesota and Tennessee. Federated plans to send out severance packages this week to laid-off workers and may issue a new round of layoff notices as well.
UNITE’s goal is to compel Federated to rescind the Fingerut layoffs. The union is also calling on state and federal officials to investigate the company if it fails to sell Fingerhut. Employees and the union have condemned Federated for not closing a sale of Fingerhut to Wayzata, MN-based Business Development Group Acquisitions (BDGA), which signed a letter of intent to buy Fingerhut on Feb. 21.
In a statement, the Chicago-based UNITE international vice president Noel Beasley said Federated imposed an unrealistic deadline on BDGA to get financing to close the sale. Federated spokesperson Carol Sanger had no comment.
On March 28, five weeks after accepting a nonbinding letter of intent from BDGA to buy its entire Fingerhut catalog business, Federated announced that it would seek alternative buyers. With its 60-day-old WARN termination notices to 3,700 Fingerhut employees due to expire, Federated said it could not wait much longer BDGA, led by turnaround specialist Peter Lytle, to come forward with the financing to complete the deal.
“While progress has been made and both Federated and BDGA intend to continue discussions and negotiations,” Federated said in its March 28 statement, “sufficient uncertainty exists as to whether a transaction will be concluded. Therefore, Federated said it will begin to explore potential transactions with third parties interested in purchasing individual Fingerhut assets–as well as catalog subsidiaries Arizona Mail Order, Figi’s, and Popular Club, which are expected to be sold as going concerns–and will begin terminating Fingerhut catalog employees in early April.”
But in a statement of its own, BDGA said it hopes to provide Federated with sufficient financial numbers to complete the deal. The firm, which intends to buy the entire Fingerhut unit, including the subsidiary titles, said that it has received letters of intent for an underwritten bank financing, but that the bank group requires additional due diligence on the value of the assets and other issues. BDGA reported that it has completed its own due diligence.
“Federated is not closing the door on BDGA,” said Fingerhut spokesperson Ben Saukko. “But we can’t keep other third parties interested in individual Fingerhut assets on hold indefinitely, especially when there’s a good chance some of them may want to rehire Fingerhut employees for their own operations. So we’re moving forward with the shutdown of the business.”
Added Federated’s Sanger: “We don’t intend to continue operating Fingerhut. So it’s costing us millions of dollars every week in losses, and that’s not something we can continue. So we’ve started the process of talking to other potential buyers about buying parts of the business, although BDGA is the only buyer who has bid for the entire Fingerhut business.”
If the BDGA deal falls through, several potential buyers reportedly remain interested in parts of the Fingerhut business. Among them are former Fingerhut chairman Ted Deikel, who along with businessman Tom Petters made a backup offer also in February. Their offer to buy an unspecified portion of the Fingerhut business, according to the Associated Press on March 28, remains on the table.