Federated, which operates more than 400 stores nationwide, including Macy's and Bloomingdale's, said that it was interested in Fingerhut's infrastructure for catalog and Internet order fulfillment. Federated was also interested in Fingerhut's database management and direct marketing expertise, which it hopes will give a platform for further growth of Federated's retail brands and nonstore retailing operations, including its Macys.com e-commerce Web site.
Shares of Fingerhut soared 30.23 percent to 24.5 in morning trading. The stock has traded as high as 21.81 and as low as 6.63 during the past 52 weeks. Federated stock dropped 4.26 percent to 40.69, and has hit a high of 56.19 and a low of 32.81 in the past 52 weeks.
In the transaction, Fingerhut shareholders will receive $25 per share in cash under a tender offer expected to start within a week. The transaction, valued at approximately $1.7 billion, including net debt of Fingerhut, is subject to regulatory approvals and other conditions. The transaction has been approved by the boards of directors of both companies.
"Joining forces with a company such as Fingerhut allows us to capitalize on and leverage our own retailing strengths and infrastructure in new, rapidly expanding channels," Federated chief James Zimmerman said in a statement. "This is an excellent opportunity for Federated and Fingerhut because our businesses and core competencies complement each other so well."
The Fingerhut core catalog represents a majority of the company's approximately $2 billion annual sales, the company said. But the company also operates catalogs under the names of Figi's, a food and gift catalog; Arizona Mail Order and Bedford Fair, both apparel catalogs; and Popular Club, a membership-based general merchandise catalog.
"This relationship will provide Fingerhut with the capital to more rapidly expand our e-commerce efforts, as well as Fingerhut Business Services, our fulfillment and marketing services operation," said Fingerhut CEO Ted Deikel. "This is an excellent transaction for our shareholders and a natural fit that will benefit both organizations."
In addition to its own e-commerce Web sites, Fingerhut also owns minority equity interests in four e-commerce companies, including PC Flowers & Gifts, an online provider of flowers, gift baskets, and gourmet food, and Roxy Systems, an Internet marketer of digital communications and entertainment services.
Beyond catalog and Internet selling, Fingerhut's range of business services includes telemarketing, direct marketing, information management, warehousing, and product fulfillment and distribution.
Fingerhut and its subsidiaries employ about 10,000 people.