Fingerhut Suitor: We're in for the Long Haul

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Business Development Group Acquisitions Inc. says it has a long-term commitment to Fingerhut if its bid for the company goes through.


"We plan on fixing it, turning it around and operating it for the long haul," said Marshall Masko, the senior partner at BDGA, Wayzata, MN, which is led by managing partner Peter Lytle.


Masko said his group would buy "substantially all of the assets of Fingerhut" but cited a confidentiality agreement when questioned about several aspects of the deal, including profitability projections or a final price.


The remaining due diligence was described as a several-stage process.


"What we're investigating now is ... the stability of the company," he said, "but we've always believed it [went] to market in a unique way, with not much competition. That's what intrigues us about the company."


A possible formal purchase agreement with parent company Federated Department Stores, Cincinnati, is expected by mid-March. The parties signed a non-binding letter of intent Feb. 21.


"Part of our due diligence process is to define exactly how big the new Fingerhut will be," Lytle said, according to The Associated Press. "It will likely be smaller, as virtually every company is today. But if it's well positioned and if it's well financed, it should grow back to where it was in a very short period of time.


"It's our intent to make sure that ... we understand exactly what this company will take to make it prosperous again. We have concluded that it is a viable business. Now we have to prove it out with mathematical modeling and go a little bit deeper into the financial structure."


Fingerhut's substantial mailing list, direct marketing programs and diverse, well-maintained database were cited as making it an attractive investment. Lytle said BDGA would buy the entire company, except for certain pieces of real estate that he did not specify.


"They also tend to do extremely well when the economy is shrinking because they provide financing to customers who otherwise might not be able to finance a particular purchase," he said. "Those are all advantages that you have going right out of the chute."


Also part of the equation is former Fingerhut CEO Ted Deikel and Tom Petters, who have put forth a second offer. Federated has said that the sale process remains open. The Deikel-Petters offer, submitted Feb. 21, expires March 8.


Mary Pernula, Petters' spokeswoman, said that Deikel and Petters, "if they were to have their offer accepted, would run an ongoing Fingerhut. The whole purpose [of the Deikel-Petters offer] is as an alternate if the other offer does not come to fruition. They want to make sure the alternative is not liquidation."


Despite the non-binding letter of intent, the parent company's loss is being reported in its financials with the assumption that the catalog operation will be closed. The news was included in Federated's fourth-quarter and fiscal 2001 results for the year ended Feb. 2. Fingerhut's after-tax operating loss for fiscal 2001 was $14 million. The company release stated that "the determination to report Fingerhut financials under the heading of discontinued operations was made in conjunction with Federated's Jan. 16 announcement that the catalog subsidiary would be sold or liquidated in fiscal 2002."


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