Bluestem Brands To Be Bought For $565M Cash

Once part-owned by the now-jailed Tom Petters, the online retailer was reportedly up for sale since March.

Eden Prairie-based Bluestem Brands Inc., will be acquired by a Pennsylvania real estate lender for about $565 million in cash, both firms announced Monday. And victims of one of Minnesota's largest business fraud schemes will see tens of millions of those dollars.
Capmark Financial Group Inc., based in Horsham, Pennsylvania, will buy Bluestem. Bluestem is the online retailer that emerged after Fingerhut collapsed upon the discovery of a Ponzi scheme operated by its owner, Tom Petters. It kept the Fingerhut brand, founded in 1948, and through that and sold goods to low- to middle-income consumers. Bluestem's third brand, PayCheck Direct, works with employers to sell large-ticket merchandise through a payroll deduction system.
The firms expect to close the sale in the fourth quarter of 2014 and said Bluestem will remain headquartered in Eden Prairie. Bluestem CEO Steve Nave will become CEO of the combined firms and join its board of directors. But it is unclear what will happen to Bluestem chairman Brian Smith, who stepped down as CEO in 2012. Information about the futures of Bluestem’s seven other board members was not released.
The Wall Street Journal first reported that Bluestem was for sale in March and a Bloomberg report cited unnamed sources as saying Bluestem could fetch as much as $1 billion. Details on what price was being asked were not reported in the months leading up to the transaction. In 2011, Bluestem explored the possibility of going public, but later withdrew its offer.
Fingerhut was purchased by Federated Department Stores Inc. for $1.7 billion in 1999 but was later shut down. In 2002, Petters, now in prison, joined with former Fingerhut owner Ted Deikel to acquire its assets after the brand was shut. Petters later lost his business holdings upon the 2008 discovery of what amounted to Minnesota’s largest business fraud to date.
Bluestem, a privately held company, said that for the 52-week period that ended on August 1, it had sales of $943 million—an increase of more than 25 percent from $752 million for the previous period.  Last year, Petters’ creditors received $85 million in deferred dividends from Bluestem.

Douglas A. Kelley, a trustee of Petters’ bankruptcy estate, said Petters owned about 18 percent of Bluestem’s shares and that his creditors would receive roughly $67 million once this deal is made final. Kelley said about $58.2 million would go to Petters’ bankruptcy estate with the other $8.8 million going to a receivership that the government will distribute through a remission process. This is in addition to last year’s preferred stock dividend through which creditors received about $85 million.
According to Bluestem’s website, the firm employs more than 1,200 people and has distribution centers in St. Cloud, Indiana and Nevada. A company spokewoman would not comment on how the sale may affect Bluestem’s workforce.