Federated Department Stores Inc., Cincinnati, will buy Fingerhut Cos. Inc., Minneapolis, for $1.7 billion. The acquisition will allow Federated to expand its catalog and Internet divisions, such as Macys.com, Macy’s by Mail and Bloomingdale’s by Mail, with Fingerhut’s state-of-the-art direct response and fulfillment infrastructure, Federated said.
The department store giant will pay $25 cash per share, or about $1.23 billion, for Fingerhut and assume between an estimated $200 million and $470 million of Fingerhut’s debt. Federated said the purchase will reduce earnings in the beginning, but will spur greater growth later on.
The deal brokers were Credit Suisse First Boston and Jones, Day, Reavis & Pogue for Federated, and Salomon Smith Barney and Faegre & Benson for Fingerhut.
The agreement has been approved by the boards of both companies, but awaits regulatory review and other conditions.
Fingerhut, which has recently been on a buying spree itself, acquiring such companies as Bedford Fair and Popular Club, will become a subsidiary of Federated and continue to operate in Minneapolis. Other catalogs include Figi’s and Arizona Mail Order. Among its e-commerce sites are The Zone Network and Roxy Systems Inc. Its 1998 revenue was $1.6 billion.
Federated operates more than 400 department stores in 33 states, including Stern’s, Burdines and Bon Marche as well as Macy’s and Bloomingdale’s. Its 1998 revenue exceeded $15.8 billion.
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