Spiegel Sells Newport News, Seeks Buyer for Eddie Bauer
The company said yesterday that it will shed its Eddie Bauer and Newport News operations.
A deal was announced with Pangea Holdings Ltd. to acquire Newport News, while Miller Buckfire Lewis Ying & Co. has been directed to solicit parties interested in acquiring Eddie Bauer.
Pangea will acquire what Spiegel described as "substantially all of the assets of Newport News" for $25 million in cash and assume certain liabilities. Newport News will remain based in New York and operate a distribution facility in Virginia.
The agreement was to be filed yesterday with the bankruptcy court. A hearing to approve the bidding procedures is expected to be set for mid-April. The transaction will be subject to all higher or better offers.
The bankrupt marketer may generate further news. Bill Kosturos, interim CEO and chief restructuring officer of The Spiegel Group, said in a statement, "We continue to evaluate and review strategic alternatives for Spiegel Catalog ... and are in preliminary negotiations with an interested party."
Company spokeswoman Debbie Koopman was asked to confirm whether Michael Otto of Germany had failed to reach a deal with creditor banks to retain control of the company.
"I believe that's accurate," she said. "The creditors committee and Spiegel Holdings were not able to reach an agreement regarding Spiegel Holdings retaining ownership of The Spiegel Group."
Scott Smallman, senior vice president at Piper Jaffray, Seattle, was blunt in his assessment of Otto, whose family reportedly owns 89 percent of the company's shares.
"Clearly, the lenders are not ultra-excited about playing ball with the Germans anymore and have reached the end of the rope," he said. "They [moved the process] toward what they wanted to do all along -- take whatever they can for Eddie Bauer and go lend the money to somebody else -- what's left of it."
Smallman said Eddie Bauer contributed the overwhelming share of Spiegel's revenue.
"The potential buyers will be as tough as they can be," he said. "The hope on the part of the lenders is that you have at least two legitimate bidders that can play off each other in order to maximize what they get out of this thing.
"My guess would be it will be a financial buyer, and not an industry buyer, that says, 'What a great opportunity to get a name, build up the brand and go public with it again in three or four years.' There's every chance that they could get the institutional investment community interested in three or four years."
Koopman said it will take several months to close an Eddie Bauer deal. She did not comment about a projected price or potential purchasers.
Lisa Erickson, public relations manager at Eddie Bauer, Seattle, said customers will see no changes in marketing or service.
"There won't be any changes in headcount," she said. "[There are] no plans for layoffs. But once a new buyer comes in, there could be any number of changes."
Eddie Bauer has more than 450 stores, catalogs and Web sites that include eddiebauer.com, eddiebauerhome.com and eddiebaueroutlet.com.
Kurt Barnard, president of Retail Forecasting, Upper Montclair, NJ, a retail industry consultancy, outlined the challenges any potential suitor will face.
"The competition ... is, to put it mildly, ferocious," he said. "All department stores are vying with specialty stores, and specialty stores are vying with each other. There are too many stores doing too many similar things."
The company hopes to finalize the Newport News deal by the end of May.
"We had other interested parties," Koopman said.
George Ittner, who served as president of Newport News from 1992 to 2003, characterized the news as positive.
"Newport News is a very strong brand that is well-positioned in the marketplace with an offer that is working and has wide appeal," he said, while emphasizing the importance of having stable ownership. "Don't underestimate the uncertainty and difficulty of operating under [bankruptcy]. Associated with that is a lot of uncertainty if you're working for the company, if you're dealing with vendors and if you're trying to recruit. All the workings of the company are greatly complicated."
Koopman would not discuss any possible suitors for Spiegel Catalog.
Miller Buckfire Lewis Ying & Co. advised the company on the Newport News transaction and is advising the company on the Eddie Bauer sale.