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Deikel, Petters Prepare a Fingerhut Offer

Former Fingerhut chief executive Ted Deikel and wholesaler Tom Petters are trying to put together an offer for Fingerhut, a spokeswoman for Petters said yesterday.

“We don't have a specific time frame defined, but they want to move very quickly and they feel they have to move quickly since so many aspects of the business have deteriorated,” spokeswoman Mary Pernula said. “They haven't had a chance to find out what the state of the business is at this point. They will have to take a look at that. It is most likely much different than it was a month or two ago.”

She would not reveal a possible purchase price. When asked whether Deikel and Petters would try to acquire the company intact or only certain aspects of the catalog operation, she said, “We just don't know.”

In a statement May 6 announcing that a potential deal with Business Development Group Acquisitions Inc. had fallen through, Federated vice chairman Ron Tysoe said no other potential buyers interested in acquiring Fingerhut as a going concern have been identified.

“We were so close,” BDGA partner Mike Harris told the Pioneer Press. The St. Paul, MN, newspaper reported that new catalog orders will be halted within a month and that the parts of Fingerhut to be sold include remaining inventory, receivables and real estate. Also reported was Federated's intent to sell such assets as call centers and data processing facilities to buyers interested in retaining employees.

BDGA, Wayzata, MN, signed a nonbinding letter of intent to buy Fingerhut in February. The Pioneer Press reported that BDGA partners said the deal collapsed because of a credit issue that arose in the past 10 days — a change sought by Moody's Investor Service that would more than double a collateral requirement, to $1.2 billion, to maintain a favorable rating on bonds used to finance credit card sales issued by Fingerhut.

Federated expects to sell catalog subsidiaries Arizona Mail Order, Figi's and Popular Club as going concerns.

“We will be moving quickly on the sale of the subsidiaries, but there is no timetable,” said Federated's vice president of corporate affairs, Carol Sanger. “We are talking to at least one party regarding the sale of subsidiaries.”

She provided no information regarding the sale of the Fingerhut customer file.

Maxwell Sroge, president of catalog consultancy Maxwell Sroge Company Inc., Evanston, IL, slammed Federated, which bought Fingerhut for $1.7 billion in March 1999.

“It was a bad marriage because there was nothing in common between the companies,” he said. “You look for synergy and there was absolutely, to my knowledge, no synergy. They didn't sell to the same market.

“They changed the method of extending credit to Fingerhut customers. Fingerhut had been successful running their business a certain way. It was not uncommon for Fingerhut to lose 25 percent on first sales to customers on bad credit because they knew the other 75 percent would be profitable over time. If they lose 1.5 percent, a big retailer goes into a panic.”

Sroge would have insisted that Deikel remain “for at least three years to affect a smooth transition, which they didn't do.”

Sroge characterized Federated as having been arrogant.

“They don't know how to run mail-order businesses,” he said. “They had the arrogance to think that what they could do with retail they could do with mail order. They are two different businesses. Not keeping on the key people is not only arrogant, but stupid.

“It's deteriorated so badly under Federated's leadership. Who would want to buy it? Sales were down substantially.”

Sroge speculated that Blair and Brylane could look to target Fingerhut's customers.

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