American Greetings and Schurman Fine Papers exchange assets
It was recently reported that American Greetings had sold its retail stores to Schurman Fine Papers and purchased the wholesale division of Papyrus. According to a press release from American Greetings, American Greetings (‘AG”) paid $18 million for the wholesale division of Papyrus, which makes fine greeting cards and other paper products. Schurman Fine Papers (“SFP”) acquired the operating rights of approximately 350 retail stores from AG, who operate these stores under the names of American Greetings and Carlton Cards, for $6 million. AG also acquired a 15% interest in SFP for $2 million. The article states that SFP now owns 511 retail stores in the United States.
While this transaction may come as little surprise to those in the industry, the financial compensation and wording of the press release is curious. According to one financial veteran, “I don’t understand it, it seems like the transaction is missing a zero.” Indeed, it does seem surprising that SFP could “acquire” 350 stores for only $6 million - or roughly $17,000 a store! It is unclear from the press release whether AG remains responsible for the leases or the nature of the ongoing operating agreement and “limited” credit facilities between AG and SFP.
Rumors are that Weston Presidio, a private equity firm which has a significant ownership stake in SFP, had hoped to take the SFP public when the firm reached a critical mass of 300 stores. While this still may be the case, it seems unlikely that they would attempt to do so in today’s rather unsettled market conditions. AG has its own share of financial problems as their latest financial results show. Clearly, shedding their retail stores will eliminate one major distraction; however, many more challenges face the company and the industry at large.
August 28th, 2009 at 8:00 pm
As a former Papyrus franchisee, I don’t believe the press release. Papyrus’ retail operations were not any more profitable or less than AG’s. They were making their money on the wholesale end. It looks like an end game for AG to easily get out of the retail business without having the issues of revealing it as a public company.
The talk of Papyrus going public has been going on for years. I don’t think there’s enough financial strength to pull it off. Plus Papyrus has never been strong in Retail Management.