Fingerhut Lives: Federated Signs Deal With Deikel, FAC

Federated Department Stores Inc. will sell certain Fingerhut assets to FAC Acquisitions LLC, Federated said yesterday, ending a saga that began with Federated announcing in January that it would close Fingerhut unless a buyer was found within days.

FAC's principals are former Fingerhut CEO Ted Deikel and wholesaler Tom Petters. No dollar figure was announced. The deal is expected to close in a few weeks.

“The bottom line is that we had anticipated selling assets of Fingerhut and for that sale realizing $1.1 billion to $1.3 billion in return, and this is a step in that process,” said Carol Sanger, vice president of corporate affairs at Federated, Cincinnati.

The deal includes the Fingerhut name and corporate headquarters in Minnetonka, MN; its distribution center and other facilities in St. Cloud, MN; a data center in Plymouth, MN, and a warehouse in Piney Flats, TN; the Fingerhut Web site; and existing inventory.

“The buyers have indicated a desire to rehire a number of Fingerhut employees as part of their future business plans,” Ronald W. Tysoe, vice chairman of Federated, said in a statement.

Federated, owner of department store chains like Macy's, Bloomingdale's, The Bon Marche and Rich's, paid $1.7 billion in 1999 for Fingerhut.

But the combination of the more upscale Federated and the discount-oriented Fingerhut never clicked. Sales in December were $209 million, down 20 percent from $260 million in December 2000. Three years ago, Fingerhut's sales were $1.7 billion. Last year, sales were $810 million.

“A lot has changed from the time that we acquired Fingerhut in early 1999 to the present,” Sanger said. “The whole economic landscape, for example, the e-commerce bubble has burst.

“The potential that existed for integrating Fingerhut and its expertise into our business is no longer significant enough for us to make the level of investment in Fingerhut that would have been required to turn it around and make it a profitable venture for us.”

For Deikel, this will be the third time he has had an ownership stake in Fingerhut.

Sanger said a firm whose founders have direct marketing expertise are more fit to run the cataloger.

“Our belief was that somebody who has focused on the direct mail business would have been interested in it and would have been in a different position from us, that the potential Fingerhut represented would have been a better fit for that direct mail business than it is for us,” she said.

Federated recently slimmed down its own direct marketing operations, reducing to a marketing site and wedding registry and dumping the Macy's catalog. The $15.6 billion company's main direct businesses are and Bloomingdale's By Mail, plus the store catalogs.

While the Fingerhut issue seems largely settled, Federated is still proceeding with efforts to sell Fingerhut's ongoing subsidiaries, Arizona Mail Order, Figi's and Popular Club.

“We're talking to parties who are interested in that,” Sanger said. “We have said from the outset that we would anticipate selling those businesses as ongoing businesses, and they're still publishing and still operating and they're not affected by this all.”

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