The Business Development Group of Wayzata and Federated Department Stores say they're calling off discussions about a sale of Fingerhut. The two parties have been holding talks since January, shortly after Federated announced it would shut down the company if no buyer could be found. The business development group says new requirements from a credit rating agency were a major factor in the decision to terminate discussions.
There's been little word about the discussions to buy Fingerhut since 3,300 employees were laid off a month ago. About 2,400 of the jobs cut were in Minnesota. At the time, one state official said the company's outlook dimmed with every passing day.
Marshall Masko, with the Business Development Group, says the end of discussions is extremely disappointing. "We've put roughly 14 or 15 weeks, almost seven days a week, into this and we were really hoping that we would be able to pull a rabbit out of the hat," he said. "We knew it was tough going in, but we always felt we had a good shot at pulling it off."
Masko says the group had already begun planning how to restart the enterprise, including decisions on calling back employees. He says one of the major problems stems from a decision by a debt rating agency that required more collateral. Masko says that effectively would have left the operation with no working capital to finance operations.
"In terms of how much more capital you'd have to come up with, it's anybody's guess, and it depends on how aggressively you would restart the business, but it could be as much as 100 million dollars or more," Masko said.
Federated officials could not be reached for comment. A prepared statement says they will pursue the potential sale of individual Fingerhut assets with third parties, with an emphasis on preserving as many jobs as possible. They'll also wind down the Fingerhut catalog operation over the next 30 days.
The action throws the spotlight on an offer submitted by former Fingerhut CEO Ted Deikel and his partner Tom Petters of Eden Prairie. They have submitted what they've characterized as a backup offer. Their spokeswoman, Mary Pernula, says they remain interested, but are saddened by all the job losses at Fingerhut.
St. Cloud Mayor John Ellenbecker says he's disappointed at Monday's development. The city is home to a major Fingerhut facility, which employed 2,700 before the January announcement.
Ellenbecker says it looks as though Fingerhut will be sold off in pieces, a fate the city was hoping to avoid. "The Petters -Deikel group is still out there. One would hope that now if in fact Mr Lytle's group is no longer involved that they would resurrect their efforts," the mayor said. "I'll be attempting to contact them also, just, to see where they are, but my understanding is that at this point we're simply at a point where Federated will be attempting to market the individual assets of Fingerhut as opposed to Fingerhut as a whole."
For some employees, the anouncement was not a surprise. Arnold Bluhmker, who worked at Fingerhut for 16 years before being laid off in January, says many Fingerhut workers have moved on, but still hope to get their jobs back somehow.
"A lot of people did find different jobs, but with people that got 10, 12 to 18 years in you know they hate to lose that," Bluhmker said.
It's not clear how much time is left for the roughly 2,300 Fingerhut employees remaining in Minnesota. More job cuts were scheduled to take effect in June.