Ted Deikel and Tom Petters have signed a non-binding letter of intent to buy most of Fingerhut from its parent, Federated Department Stores. Terms of the potential deal were not disclosed, but it brings renewed job hopes to laid-off Fingerhut workers, and to the city of St. Cloud, which was bracing for the closure of one of its largest businesses. A deal would put Deikel back in charge of a company he had helped build into one of the nation's largest catalog retailers.
There is no deal yet. In fact, many non-binding letters of intent are never consummated. Peter Lytle's Business Development Group failed in its bid for Fingerhut after signing a similar letter of intent.
Deikel says he has every confidence that this letter of intent will become a deal. But he said, there are still some obstacles left to clear.
"There are some big issues we have to address and resolve with Federated. We feel that we can. Otherwise we wouldn't be standing here. But they're there. We're not done yet. We've got a couple weeks worth of discussion to try to resolve the issues," Deikel said.
St. Cloud Mayor John Elenbecker is more optimistic that this deal will go through than he was about Lytle's bid, for one important reason. "Unlike the Peter Lytle deal, this is not contingent upon the purchaser securing financing. It's a smaller deal, and it's simply contingent upon them working out the final deal of the purchasing agreement," according to Elenbecker.
If the deal goes through, hundreds - maybe thousands - of Fingerhut employees will keep their jobs. Under the deal, Deikel and Petters have agreed to buy Fingerhut's core assets. That includes the distribution center and other facilities in St. Cloud, Fingerhut's corporate headquarters in Minnetonka, the data center in Plymouth.
The two also plan to buy Fingerhut's brand name, Web site and its unsold inventory.
Deikel and Petters will not buy Fingerhut's ancillary businesses, which include a number of smaller retailers that Federated had tacked onto Fingerhut over the past several years.
Federated had spent the last several months winding Fingerhut down. Fingerhut recently stopped taking catalog and Internet orders. Politicians, and city officials in St. Cloud were preparing for a day when Fingerhut would be no more.
"Under his direction, that business will get back to either what it was or near what it as."
- Max Sroge, catalog retail consultant
Sen. Paul Wellstone says Fingerhut and the state have narrowly avoided yet another massive layoff. "I don't think you're going to be able to pin anyone down on exactly how many jobs right away will be there. But this will mean, of course, a significant number of jobs will be maintained in Minnesota. And I think we'll see an increase in the number of jobs," said Wellstone.
Ted Deikel ran Fingerhut from 1974 to 1984, and again from 1990 to 1999. He helped build the company into a catalog retailing juggernaut, claiming about $1.5 billion in revenues by the time he left.
Deikel sold Fingerhut to Federated in 1999 for $1.7 billion. Federated wanted to use Fingerhut's warehouses and customer database to take advantage of the boom in e-commerce. But e-commerce faded and Federated changed Fingerhut's credit standards. Fingerhut began to sputter.
Now Deikel is poised to reclaim Fingerhut's helm. Catalog retail consultant Max Sroge, says Deikel has a strong motivation.
"He'd buy it back to make money," Sroge said. "I don't mean to be facetious. But he'll buy it back because under his direction, that business will get back to either what it was or near what it as."
Sroge says Deikel's decision to take Fingerhut back is not a rare one in the world of business. "It isn't uncommon for an entrepreneur, to sell a business and then to buy it back. And the reason that that happens quite often is because, the acquiring company doesn't understand the business the way the entrepreneur did."
Neither Deikel and Petters nor Federated will say when they expect to complete the deal. But Federated said in a press release that it's committed to move as quickly as possible to complete the deal.