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​Lillian Packing It In – Sells catalog biz to Zelnick group for $60M

New York Post, 04.17.03
Suzanne Kapner and Tim Arango

Catalog retailing legend Lillian Vernon is stepping aside after selling out to a group of private equity investors that includes the former music industry executive Strauss Zelnick for $60 million in cash.

If approved by shareholders, the deal will let Lillian Vernon cash out of her namesake company, which sells gifts, household appliances and gardening tools mainly through catalogues and the Internet.

Lillian Vernon, 75, will resign as chief executive and chairman, retaining the largely symbolic title of non-executive chairman, and will focus on merchandising.

Zelnick, the former chief executive of BMG Entertainment, a unit of Bertelsmann, which now runs the private equity firm ZelnickMedia, is to be named chairman. The other private equity firm is Ripplewood Holdings.

Vernon and her son David Hochberg, 45, who currently own 40 percent of the company, stand to make $21 million from the deal before taxes.

Vernon will own 5 percent of the company following the acquisition. Vernon, who was born Lilly Menasche, left Nazi Germany for New York City during World War II. In 1951, she used $2,000 she had received as a wedding gift to start a mail order company from her kitchen.

Since then, Lillian Vernon, of Rye, N.Y., has grown to include seven catalogues - including the namesake Lillian Vernon, Lilly's Kids and Christmas Memories - as well as a handful of retail stores.

More recently, the company has struggled to compete against supermarkets and discount stores. "It's a turnaround situation," Zelnick told The Post. "We're going to focus on efficiencies and cost reductions." Initially, those measures will include scaling back mailings to focus only on the most profitable customers, Richard P. Randall, the chief operating officer, said.

Lillian Vernon shares closed up $2.90 to $7.10. The offer, of $7.25 a share, represents a 73 percent premium to Tuesday's closing price.