THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, September 19, 1995 TAG: 9509190066
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY STEPHANIE STOUGHTON, STAFF WRITER
LENGTH: Medium: 55 lines
Lillian Vernon Corp., the New Rochelle, N.Y.-based catalog retailer, said Monday that its agreement to be acquired by a private investment firm has been terminated.
The buyout would have been good news for Virginia Beach because Freeman Spogli & Co. supported Lillian Vernon's plans for a $35 million expansion of its distribution center. With financing on its way, Lillian Vernon anticipated breaking ground at the facility near Lynnhaven Mall over the summer.
But along with Los Angeles-based Freeman Spogli goes the expansion financing. Lillian Vernon, meantime, says officials are taking another look at the project.
``The company's board of directors is reassessing our space needs in Virginia Beach,'' spokesman David Hochberg said. ``The entire project is being carefully reviewed. It's temporarily on hold.''
The company may opt to build according to its original plans, build nothing at all or do a scaled-down version, Hochberg said.
There is no pressing need to break ground now, Hochberg said. The Virginia Beach distribution center easily meets the company's demands except during the six-week peak before Christmas. During that period, space is very limited, he said.
The national distribution center, which opened in 1988, employs 1,000 year-round workers and more than 3,000 at its peak season.
Earlier this year, local economic development officials estimated that the expansion would bring 1,000 additional jobs, including 400 full-time jobs, to the area.
Virginia Beach officials grew worried when Lillian Vernon went on sale, but were relieved to hear that the new owner would continue with the expansion.
Freeman Spogli, an investment firm, agreed to buy Lillian Vernon for $19 a share, or about $190 million. But Lillian Vernon said in a statement Monday that it doesn't think financing will be obtained at that price.
The company in part blamed lower earning estimates for fiscal 1996. Officials expect net income per share to be 10 percent to 15 percent lower than the $1.38 per share earned in fiscal 1995, which ended in February.
Also contributing to the financing troubles were rising paper prices for its catalogs and uncertainty in the retail sector. Spokesman Hochberg said catalog paper costs are about 60 percent higher this year.
When the proposed acquisition was announced June 14, the $19-a-share price was a discount to the company's stock price of 20 1/8. The next day, the company was sued by three shareholders who claimed the price was too low.
In the meantime, Lillian Venon posted a bigger loss in the first quarter ended May 27. It lost $2.82 million, or 29 cents a share, from $989,000, or 10 cents per share, in the same period a year earlier. by CNB