Two Fingerhut suitors emerge

A pair of Minnesota businesses are making an effort to save Federated Department Stores’ Fingerhut catalog unit from being shut down.

Federated, which bought Fingerhut in 1999 for $1.7 billion, announced last week that it will liquidate the core Fingerhut unit, which sells general merchandise to lower-income consumers. Federated is trying, however, to sell Fingerhut’s subsidiaries, which include multititle apparel mailer Arizona Mail Order and food gifts book Figi’s.

Veteran retailer Tom Petters, chairman of Eden Prairie, MN-based RedtagBiz, is heading up a group of investors interested in purchasing Fingerhut. Petters says that, having signed a confidentiality agreement with Credit Suisse First Boston, the investment bank that represents Federated, he is unable to comment.

Business Development Group (BDG), a turnaround specialty company based in Wayzata, MN, has also inquired about purchasing the core Fingerhut business. “We think it’s a great company,” says Marshall Masko, a partner in BDG and a former senior vice president with now-defunct multitle mailer CML Group. “It markets to people who don’t have access to credit cards, and since the company has been profitable in the past there’s no reason to believe that it can’t be profitable again. Fundamentally, the business is quite sound. With some right-sizing or tweaking of the business model, this is an economically viable company.” BDG, he adds, is interested only in the core Fingerhut catalog.

“This a nine-inning game that needs to be played in about an hour and fifteen minutes,” Masko says. “You can’t allow this business to languish. If you lose one or two mailings in the cycle you’re dead in the water. But this is an extremely complicated deal in light of the financing and receivables. There are a lot of variables and moving pieces here at stake here.”