Deal to Buy Lillian Vernon Falls Through

From Bloomberg Business News

Lillian Vernon Corp. said its proposed acquisition by Freeman Spogli & Co. was terminated after lowered earnings projections derailed financing efforts.

The catalogue retailer said in June that it had agreed to be acquired by the Los Angeles-based private investment firm for $19 a share, or about $190 million.

The New Rochelle-based retailer said financing could not be obtained for the acquisition, in part because the company's net income will not reach projected levels for the fiscal year ending Feb. 25.

Earnings for the year, after costs of the proposed transaction, will be 10% to 15% lower than the earnings of $1.38 a share for the last fiscal year, the company said.

Also contributing to the decision, it said, were "recent trends in the catalogue industry, particularly the continued increase in paper prices" and "general uncertainty in the retail sector."

When the proposed acquisition was announced June 14, the $19-a-share price was a discount to the company's stock price of $20.125. The next day, the company was sued by three shareholders who claimed the price was too low.

Lillian Vernon stock closed down $2.50 at $13.625 on Monday on the American Stock Exchange.

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