Fortunoff Buy Opens Lord & Taylor to Home
February 10, 2008,
The acquisition of Fortunoff through a type of pre-packaged bankruptcy proceeding by Lord & Taylor owner NRDC Equity Partners will bring the venerable L&T back into the home furnishings business in a major way.
"It's the marriage of two great retailers," said Gilbert Harrison, chairman of investment bank Financo, which advised NRDC in the deal. "The synergies that they can bring — especially putting Fortunoff's home and jewelry businesses in Lord & Taylor stores — will be good for both companies," Harrison told HTT.
Over the past few years, Lord & Taylor has made major efforts to transform and upgrade its image and merchandise mix, which had followed a typically promotions-oriented May Co. approach. After May was purchased in 2006 by Federated Department Stores, now Macy's Inc., Lord & Taylor was sold to NRDC.
The Fortunoff business had been sold to Trimaran Capital Partners and K Group in 2004 by descendants of company founders the Fortunoff and Mayrock families. Fortunoff currently has sales of about $430 million.
Under the NRDC ownership it is expected that Fortunoff, too will be moving upwards in its merchandise mix and marketing. NRDC plans to invest $100 million into the Fortunoff business, said Richard Baker, chairman of Lord & Taylor and ceo of NRDC in a statement.
"Fortunoff is a valuable brand with great potential for continued growth," Baker said.
To assist Fortunoff in continuing to purchase inventory, Lord & Taylor has extended a $10 million letter of credit "in conjunction with Fortunoff's bankruptcy filing," the company said.
"It has been a difficult retail environment and capital constraints have limited our expansion opportunities," said Arnold Orlick, Fortunoff's chief executive, in the same statement. "This transaction will help realign our capital structure and provide an avenue for future growth … we look forward to restructuring our business under a new owner."
The company said all its locations, including its flagship Manhattan store as well as its corporate headquarters here, will remain open during the Chapter 11 process.
Fortunoff announced the deal last week after officially filing a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in a New York court. The legal process will keep the bankruptcy proceeding open to other potential bidders on Fortunoff until final court approval of the current proposal; the company said it expects the sale to close in early March.
Besides Lord & Taylor, NRDC also holds a major ownership stake in home furnishings specialty retailer Linens 'n Things.
NRDC Equity Partners is a joint venture between father-and-son team Robert Baker and Richard Baker, principals of shopping center operator National Realty & Development Corp.; and William Mack and Lee Neibart, partners of Apollo Real Estate Advisors.
In November 2005, NRDC joined with Silver Point Capital and Apollo Management in the $1.3 billion acquisition and ongoing management of Linens 'n Things. In February 2006 both Neibart and Richard Baker joined the board of directors of LNT Leasing II, LLC.
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