Direct Marketing Services Inc. (DMSI), the multititle mailer that acquired Montgomery Ward out of bankruptcy in June 2004, is on the block. The auction block, that is: A public auction is slated for Aug. 5 to sell the assets of DMSI as part of a legal assignment for the benefit of creditors.
DMSI company officials could not be reached for comment. But according to a source close to the situation who requested anonymity, several parties are interested in buying the company.
In addition to the Montgomery Ward Website (www.wards.com), Chicago-based DMSI also mails one Sears licensed specialty title and gifts book Charles Keath, which it acquired from Boston Proper (then known as The Mark Group) in late 2003. DMSI’s HomeVisions brand is an online catalog.
According to a July 23 legal notice advertisement in the Chicago Tribune, Howard R. Korenthal is acting as the Assignee for the Benefit of Creditors of Direct Marketing Services Inc. At the auction, to be held in the offices of Chicago law firm Shaw Gussis Fishman Glantz Wolfson & Towbin, substantially all of the assets of DMSI will be sold, other than the lien of JPMorgan Chase Bank.
The public auction certainly “looks like a liquidation of the company,” says Lee Helman, managing director with investment bank Financo. What it means to DMSI’s future obviously depends on who buys which assets, he says.
While a public auction is not a bankruptcy filing, it’s similar to one, says Stuart Rose, a managing director for investment bank Tully & Holland. It’s cheaper and faster to do, because it doesn’t involve the courts, he says.
Rose expects someone will pick up accounts receivable and inventory and liquidate it, “and someone else will buy the name and try to restart it.” Retail liquidators Gordon Brothers “and that type of buyer are probably high on the list.”
The biggest DMSI asset is likely the Montgomery Ward Website, Rose says. “The name still has some resonance.”
What happened to DMSI? At press time it wasn’t clear if the merchant was just another victim of the weak economy and higher catalog production/distribution costs, or if there were other factors at play. The company made the news late last month when it was disclosed that hackers broke into its database and exposed more than 50,000 customer records.
While DMSI officials said last month that they had met the obligations for handling the security breach, which was detected in December, the company was taken to task in the press for not notifying customers about the problem.