A 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, Lilllian Vernon’s chief financial officer and chief operating officer, both ZelnickMedia and Ripplewood will have stakes in Lillian Vernon, although the exact split was not known at deadline.
“I think it’s a great move for Lillian Vernon,” said catalog consultant Katie Muldoon. “I understand the new companies are well-known in Asia and maybe there’ll be more opportunities there in the future.”
She also speculated that this transaction might give a jump-start to the Lillian Vernon’s licensing ambitions.
“Ripplewood is well-known for turning companies around,” added Jon Prunier, president of investment bank Petsky Prunier. “It’s interesting that Zelnick, who comes from the entertainment business and has a merchandising background, would want to go into the catalog business.”
He noted that Lillian Vernon may have some work to in further building its brand especially given the slump in which cataloging has been in recently.
Lillian Vernon, who founded the company 52 years ago and is currently chairman of the board, will serve as a non-executive chairman and corporate spokesperson. She 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, chief executive officer of ZelnickMedia and a former president and chief executive officer of BMG Entertainment, will be the chairman of the new company. ZelnickMedia invests in firms within the direct marketing, publishing, recorded music, online games and entertainment software, sports marketing, television production and distribution and media technologies industries.
ZelnickMedia was one of around half a dozen companies that had approached Vernon within the past year, Randall said. The Rye, NY firm never had to put a prospective booklet together, and did not solicit bids.
“We were doing as much due diligence on the buyers as they were on us,” Randall said. “We would have had a problem if we identified one with highest offer and another with the guys we wanted to do business with. Fortunately, that didn’t happen.”
The company took a $4.1 million net loss on sales of $78.3 million during the third quarter of its fiscal 2003 year, 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 Paul Pecorin, senior vice president and chief information officer, to remain intact.
Most of the changes the new management is planning will not readily be seen by consumers. One project is the works is the “rationalization” of the number of catalogs the company sends out, Randall said.
“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 said.
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 a way to build the company,” Randall said.
Network
