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Federated Sheds 2 More Fingerhut Operations

Federated Department Stores Inc. took another step last week in the disposal of assets that were part of former subsidiary Fingerhut Cos. as it said that the assets of Arizona Mail Order and Figi's catalog operations were acquired by JPMorgan Partners LLC.

Terms of the deal were not disclosed. JPMorgan Partners is the private equity arm of J.P. Morgan Chase & Co. J.P. Morgan was interested in the two subsidiaries “as long as they were not attached to money-draining” Popular Club, according to The Deal.com.

Federated spokeswoman Carol Sanger said the Popular Club title remains to be dealt with and that the company “should have something on that in the near term” regarding its sale.

Last week's deal was in the works for several months, she said.

Arizona Mail Order, Tucson, AZ, markets women's apparel through its Old Pueblo Traders, Bedford Fair, Willow Ridge, Lew Magram, Brownstone Studio, Regalia, Intimate Appeal and Coward Shoe catalogs. Figi's, Marshfield, WI, markets food and specialty gifts through its Figi's and JF Collection titles.

The businesses, with more than 3.7 million active customers, will be combined into a new holding company to be known as Crosstown Traders Inc.

“There were a number of people who looked at the transaction,” said Larry West of West Cos. Inc., a New York investment bank that handles catalog transactions. “Figi's and Arizona Mail Order were marketed together. They are very different in terms of product line and customer, and for that reason a lot of people didn't want to pursue it. And that's why it took so long.

“They are different businesses. Arizona Mail Order is apparel for the mature marketplace, 55 and older, and it's low- to moderate-income. Figi's is a specialty food gift business with a consumer and BTB and a higher-income customer.”

West said that the brand names, especially within Arizona Mail Order, are known and respected in the female mail-order buyer population.

Michael P. Sherman, who served as president of Fingerhut from spring 2000 through last month, is vice chairman of Crosstown, and Steven Lightman is president/CEO.

“Lightman and Sherman know that even though the businesses are different, they are significantly counter-seasonal to each other,” West said. “Figi's is a fourth-quarter business whereas Arizona Mail Order is spread throughout the year.”

A source close to the deal said that “they have dominant brands. Figi's and AMO have extremely attractive demographics. They've got such big market share, and direct marketing and catalogs, particularly, represent a stable industry.”

The source also said that marketing strategy and direction will “largely be consistent with past practices.”

Michael Petsky, CEO of Petsky Prunier LLC, a direct marketing industry investment bank, expressed optimism when questioned about the deal.

“I think those properties are keystone properties with collectively a few hundred million dollars in revenue and a solid management team and a redefined vision for the businesses,” he said.

“The key drivers for building value will be getting back to the basics that made AMO such a valuable property, and that's a refined customer segmentation and building targeted brands for specific customer niches,” he said. “AMO was a solid company prior to getting caught up in Fingerhut's credit fiasco. Figi's was a business that was a very attractive, highly seasonal company that has been around for years. To go back at these customers without the credit overhang is going to be key for building success.”

Both Sherman and Lightman said they invested in the company but would not give specifics, and they also did not comment when asked about the sale price.

Crosstown Traders will be based in both Tucson and Greenwich, CT, with Lightman in Tucson and Sherman in Greenwich. The company is now in Plymouth, MN, the location of the former Fingerhut data center.

The Deal.com cited sources as placing the sale at roughly $150 million and saying that the Popular Club catalog has little value.

It also reported that Federated initially thought it would get $250 million for Arizona Mail Order alone before trying to sell the subsidiaries as a group. It also described Arizona Mail Order as the more valuable of the two assets.

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