Two down, one to go: Bankrupt Downers Grove, IL-based Spiegel Group on May 24 agreed to sell its Spiegel general merchandise catalog to Hinsdale, IL-based Pangea Holdings Ltd. Pangea bought Spiegel’s Newport News women’s catalog unit earlier this month. Should the sale go through as planned, all that remains for Spiegel Group is to find a buyer for its Eddie Bauer division and its Groveport, OH, fulfillment center.
Pangea agreed to acquire Spiegel catalog for about $53.4 million in the form of $22 million in inventory commitments, $29.4 million in assumed liabilities, and $2 million in cash. As it did when it agreed to buy Newport News, Pangea represents the “stalking horse” bidder. Other prospective buyers have until June 11 to make bids that must exceed Pangea’s by at least $300,000. If other bids are made, the bankruptcy court is expected to hold a public auction on June 15.
Pangea Holdings is run by Christian Feuer, formerly Spiegel Catalog’s vice president of marketing and advertising production, and two partners based in China. In late February, Pangea made a smaller, quieter deal: It bought Florence, MA-based Motherwear, a cataloger/retailer of apparel and accessories for expecting and nursing mothers. The Newport deal is expected to close next month. Calls to Pangea went unreturned at press time.
Spiegel, which filed for bankruptcy protection Chapter 11 in March 2003, views the pending deal as “a very positive step,” says spokesperson Debbie Koopman. “We’re working toward a transaction that will help move the catalog forward and continue to serve its customer base.”
As for Eddie Bauer, Koopman won’t reveal who or when Spiegel Group will sell it. But according to published reports, a number of private equity firms–including Texas Pacific Group, which owns most of J. Crew, and Kohlberg, Roberts & Co.–are interested. “We’re continuing to go through the process,” Koopman says. “This will take several months.”
Because it already owns Newport News, “there’s a tremendous opportunity for Pangea,” says Scott Weiler, vice president for business development at Minneapolis-based direct response firm Penn Garritano and the former marketing director in charge of customer acquisition for Spiegel catalog from 1999 to 2002. “It now has two businesses that ceased to be viable under their former corporate environment but are now viable in their new surroundings.”
Despite Spiegel’s recent problems, Weiler says, Pangea is getting a vibrant customer base. “At our peak in 1999-2000, we could mail about 5 million books and get 80%-90% profitability,” Weiler says. “As the business changed that number dropped dramatically.” Still, he estimates, Spiegel catalog has hundreds of thousands of responsive customers that “any cataloger in the industry would kill for.”