Losing patience, Federated seeks Fingerhut sale options

Five weeks after conditionally accepting a buyer’s nonbinding letter of intent to buy its entire Fingerhut catalog business, Federated Department Stores is seeking alternative buyers. With its 60-day-old WARN termination notices to 3,700 Fingerhut employees due to expire in early April, Federated said on March 28 that it will lay off 3,300 Fingerhut employees by April 5, and explore the sale of the company’s assets immediately. That is unless the Wayzata, MN-based investor group Business Development Group Acquisitions (BDGA) led by turnaround specialist Peter Lytle, comes forward very soon with financing to complete the deal it agreed to on Feb. 21.

“While progress has been made and both Federated and BDGA intend to continue discussions and negotiations,” the statement said, “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.”

On the other hand, in a release of its own, BDGA says it hopes to provide Federated with sufficient financial numbers to complete the deal. The firm says 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 says it has completed 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 shut-down of the business.”

Adds Federated spokesperson Carol 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,” she says. “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 include 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.

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