LILLIAN VERNON PREPARES FOR BUYOUT

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Lillian Vernon Corp., the catalog company started in 1951 with a reported $2,000 investment, is set to be acquired by investment company Freeman Spogli & Co. for $190 million.

Subject to Lillian Vernon shareholder approval in August, Freeman Spogli will pay $19 per share to buy a majority interest in the company. Lillian Vernon, 68, the New Rochelle, N.Y.-based cataloger's chairman-CEO, and her son, David Hochberg, VP-public affairs, will stay with the company and will retain about 25% of Lillian Vernon equity.

"In Freeman Spogli we have found a partner which has provided value for our stockholders while committing to building our business in the future," Miss Vernon said in a statement. "I am personally looking forward to a successful relationship."

"Freeman Spogli is committed to growing the business and building upon our existing success. Freeman Spogli is committed to the company and the people who work here," Mr. Hochberg said.

However, at least one analyst wasn't so sure.

"In my experience, very few investment bankers are long-term investors in a business," said Maxwell Sroge, president of Maxwell Sroge Co., an Evanston, Ill., catalog consultancy. ".... I don't say it critically, but I don't think [Freeman Spogli] are long-term investors and developers of business in the catalog industry. The role of investment bankers is to dress it up in some way, package it and improve the bottom line of the company and turn around and sell it to the public" in a couple of years.

Freeman Spogli, with offices in Los Angeles and New York, was founded in 1983 and has organized and invested in more than 20 transactions including Orchard Supply Hardware Corp. and Tops Markets. In 1993, Freeman Spogli and Co., acquired Brylane, a leading catalog retailer of women's apparel from The Limited, including catalog operations of Lane Bryant, Lerner and Roamans.

In the deal, Freeman acquired 56%, management owned 4% and the Limited retained 40%, said John Roth, spokesman at Freeman Spogli.

"My sense is they could package Brylane with Lillian Vernon in a public offering, that would be a possibility," Mr. Sroge said.

In a statement, founders Bradford Freeman and Ronald Spogli credited Miss Vernon and her team with creating "a unique catalog retailing franchise" and went on to say, "Although the catalog industry is currently experiencing difficult operating conditions, we believe the company has excellent long-term growth prospects."

Lillian Vernon sales for the year ended Feb. 25 rose 13.3% to $222 million. The company's catalogs include Lillian Vernon, Lilly's Kids, Welcome, Private Sale, Christmas Memories, Personalized Gifts and Lillian Vernon's Kitchen. The company's data base has about 17.6 million names, Mr. Hochberg said.

As catalogers face the prospect of rising ink, paper and postage costs, Lillian Vernon has made some explorations into the world of new media, including involvement last year with a CD-ROM catalog from Magellan Interactive Multimedia (AA, Aug. 8). There also have been talks about home shopping TV programs.

Miss Vernon was one of four direct-marketing leaders inducted into the Direct Marketing Association Hall of Fame last year.M

Laura Loro coordinates Direct Marketing. To reach her, call (609) 784-9090; fax, (609) 784-9119; or write her at 904 Champlain Dr., Voorhees, N.J. 08043.

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