Less than a month after filing for Chapter 11 bankruptcy protection, gifts and housewares cataloger Lillian Vernon has reached a tentative agreement to sell the 57-year-old company, according to documents filed last week in U.S. Bankruptcy Court in Wilmington, DE.
Court documents say the $9.3 million base purchase price could be adjusted based on inventory and the value of other property. The Virginia Beach, VA-based company listed its inventory with a book value of at least $21.1 million in court documents. According to published reports, the potential buyer is Personal Creations.com, a Lemont, IL-based cataloger/, which like Lillian Vernon specializes in personalized gifts.
Personal Creations.com is owned by Creative Catalog Holding Corp., which reported $42.9 million in sales for 2007, according to Hoover’s business directory. Personal Creations.com reported sales of $9.0 million and has 160 employees. Court documents label Creative Catalog Holding Corp. as the “stalking horse bidder” and Lillian Vernon officials plan to ask a judge for permission to hold an auction to gauge buying interest in the company.
Those bids are due March 31 and the auction is scheduled for April 1 at a Wilmington law firm. Any sale agreement requires approval from the bankruptcy court on April 3. Lillian Vernon officials believe a quick sale is the best way to raise money to pay off debts. “The debtors have nearly exhausted their cash resources and do not have additional investors willing to invest additional funds,” court documents say.
Lillian Vernon, which has been owned by Sun Capital Partners in May 2006, filed for Chapter 11 bankruptcy protection on Feb. 20. The merchant said its 30 largest unsecured creditors are owed $11.6 million. It also said it owes about $15.5 million to secured lender Wachovia Bank, and roughly $7.5 million to investors.
The cataloger’s chief financial officer Robert J. Eveleigh said in court papers that the company has “determined that a sale or orderly wind down of the debtors’ business is in the best interest of all stakeholders.” Last month Lillian Vernon hired New York-based investment bank Gruppo, Levey & Co. to explore strategic alternatives.
Lee Helman, managing director with New York-based investment bank Financo, says the tentative sale price is “a full price for where the asset is, but Personal Creations should get a lot of synergies that they are obviously willing to pay for.”
Chris Shannon, managing director for New York-based investment bank Berkery, Noyes & Co., says Personal Creations.com is “part of a larger catalog conglomerate that has always operated well and has a strong balance sheet now. They are in a good position to take advantage of the catalog market and a brand like Lillian Vernon is well-known in the catalog/direct-mail market.”