K-Tel Buys Ailing Regal Shop for $2.5M

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K-Tel International Inc., Los Angeles, acquired the major media assets and some assumed debt of Regal Shop International, a DRTV marketing company in London, for about $2.5 million this month.


The acquisition effectively means that Regal Shop will cease to operate and liquidate its remaining assets.


The deal also means K-Tel would have a stronger presence in France and Belgium, where Regal Shop managed two long-term media contracts. Under terms of the agreement, K-Tel's wholly owned U.K. subsidiary K-Tel Marketing Ltd. acquired Regal Shop's five-year contract on channel RTL9 in France. That contract is jointly owned by Canal Plus, the French media company.


K-Tel also acquired the 18-month contract on Belgian channel VT4. That contract is jointly owned by the international subsidiary of Williams Worldwide Television Inc., a DRTV media agency in Santa Monica, CA.


The acquisition is considered another indication of consolidation in the European DRTV industry, which had gone through a boom period during the early 90s. K-Tel also markets DRTV products in Germany, Switzerland, Austria and Luxembourg, said David Weiner, president of K-Tel, who wants the acquisition of Regal Shop's media assets to lead to more efficiencies in distributing products throughout Europe.


"The combination of our companies will allow us to reduce some of cost of goods, to efficiently purchase goods and increase our upsell rates," he said. "Our infomericals and a large percentage of our DR spots have upsells to maximize our margins."


He said that his company will consolidate its operations with those of Regal Shop into a vertically integrated structure, using its German operations as a model. In that country, it not only markets products through DRTV spots and infomercials, but also manages a call center and its own fulfillment operations. The company also places products in retail and mail order channels.


"We're the largest infomercial company in Germany, where we control 42 percent of the terrestrial infomercial time," he said. "We think the assets of Regal Shop and K-Tel can be combined to maximize certain synergies."


Regal Shop's annual revenue from the media contracts was $15 million, although the company was not profitable. The acquisition comes at a time when Regal Shop faced continuing financial difficulties. The company was in discussions last year to be acquired by HSN Direct, the infomercial joint venture between Home Shopping Network and a subsidiary of TCI Corp., the cable holding company in Englewood, CO. Those talks fell through, which led Regal Shop to approach K-Tel last month, Weiner said. Richard Winfrey, the managing director of Regal Shop, is expected to work for K-Tel.
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