Private equity fund Ripplewood Holdings LLC will acquire Lillian Vernon Corp. in an all-cash transaction valued at $60 million. The sale is expected to close by July 31.
ZelnickMedia, New York, will be responsible for the day-to-day management of the specialty catalog and online retailer. According to Dick Randall, Lillian Vernon’s CFO and COO, both ZelnickMedia and Ripplewood will have stakes in Lillian Vernon, although the exact split was not known at deadline.
Lillian Vernon, who founded the eponymous company 52 years ago and is currently chairman of the board, will serve as a non-executive chairman and corporate spokesperson. Vernon will no longer be responsible for the day-to-day operations of the business, and is expected to own 5% of the acquired company following the merger.
Strauss Zelnick, CEO of ZelnickMedia and a former president and CEO of BMG Entertainment, will be chairman of the new company. ZelnickMedia invests in firms in the direct marketing, publishing, recorded music and other industries.
ZelnickMedia was one of around half a dozen companies that had approached Vernon within the past year, Randall said. The Rye, NY firm did not solicit bids.
The company took a $4.1 million net loss on sales of $78.3 million during the third quarter of its fiscal 2003, which ended Nov. 23, 2002. But the strength of the brand, combined with the upside once the economy turns, made Lillian Vernon an obvious acquisition target, Randall said.
Current plans call for Lillian Vernon’s management structure, which includes Randall, president Kevin Green and PaulPecorin, senior vice president and chief information officer, to remain intact.
Most of the changes the new management intends will not readily be seen by consumers. One project in the works is the “rationalization” of the number of catalogs the company sends out, noted Randall.
“We believe there are more scientific ways to determine who should be mailed, how many they get and how often [than the company has previously used],” Randall claimed.
While this may involve trimming back the number of catalogs Lillian Vernon sends out, don’t expect wholesale volume drops. One way to make [newly acquired] companies profitable early is to cut circulation, but that’s not the way to build the company,” Randall said.
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