Quietly, nearly all the pieces of defunct cataloger Foster & Gallagher (F&G) — the gifts division, the horticultural titles and the third-party fulfillment business — have been sold. According to F&G spokesperson Doug Morris, only its corporate real estate, such as offices and call centers, remains.
On Aug. 27, the U.S. Bankruptcy Court for the District of Delaware approved the sale of F&G’s fulfillment business, Louisiana, MO-based Stark Bros. Fulfillment Services Co., to Lexton Group. Lexton is headed by former Stark Bros. vice president Jack Alexander. Terms of the deal were not disclosed. Stark Bros. had been filling backorders for F&G’s Breck’s and Spring Hill Nurseries gardening titles since the company filed for Chapter 11 bankruptcy protection on July 2.
Then, on Sept. 19, the bankruptcy court approved the sale of substantially all the assets of F&G’s $50 million gifts business to San Francisco-based equity management firm Brecon Capital for $15 million. Unlike F&G’s horticultural titles, the gifts group, which includes Walter Drake and Home Marketplace books, had remained fully operational following the Chapter 11 filing.
Brecon is an affiliate of San Francisco-based holding company Jesse.Hansen, which has invested in other multichannel marketers such as Peet’s Coffee and Bare Essentials. “We were looking at Walter Drake for several months,” says J.R. Matthews, president of Brecon Capital, which plans to use the acquisition as a platform for future catalog purchases. Brecon will keep the business and its 365 full-time employees in Colorado Springs, CO, Walter Drake’s home since 1947.
“It’s great to have our ownership situation pinned down,” says Walter Drake president Jon Medved. “Despite our excellent performance, we have been in a strange situation because of our former parent company’s bankruptcy. We are happy to be out of that environment.”
Also on Sept. 19, Lawrenceburg, IN-based cataloger Gardens Alive agreed to buy F&G’s horticultural business, which includes the Breck’s, Gurney Seeds, Henry Field’s, Michigan Bulb, Spring Hill Nurseries, and Stark Bros. catalog titles, for $10.75 million.
Gardens Alive did not return calls by press time, but it reportedly plans to restart the catalogs, which were suspended at the time of the Chapter 11 filing. Last year the horticultural group (excluding the troubled sweepstakes portion of the business) generated more than $130 million in sales and EBITDA of more than $5 million.
How did we get here?
Some industry observers blame F&G’s demise on the reliance of its Michigan Bulb catalog on sweepstakes as a prospecting tool. Sweepstakes marketing came under fire in the late 1990s, and in April 2000, Congress passed the Deceptive Mail Prevention and Enforcement Act, which severely restricted the use of sweepstakes. It also severely affected F&G’s sales: According to an F&G employee newsletter, Michigan Bulb’s gross revenue between 1999 and 2000 tumbled 44%, from $116 million to $65 million.
At the same time, F&G’s gardening catalogs, which made up the core of its business, faced increasing competition from “big box” retailers. Total company sales fell from a high of $476 million in 1997 to $337 million last year.