The Wall Street Journal-20080204-Fortunoff to File for Chapter 11 Before Sale

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Fortunoff to File for Chapter 11 Before Sale

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Fortunoff, the Uniondale, N.Y.-based regional jeweler, was expected to announce a Chapter 11 filing as early as last night, paving the way for NRDC Equity Partners to acquire the privately owned jeweler for about $100 million, according to people familiar with the matter.

NRDC, the giant retail developer and owner of department-store chain Lord & Taylor, is near a deal to buy the jeweler, these people said last night. As a prerequisite, Fortunoff was expected to file the voluntary Chapter 11 petition to reorganize.

The jewelry and home-furnishings chain operates about 21 stores in the New York, New Jersey and Connecticut area. It generates about $450 million in annual sales but has struggled to grow following its 2004 buyout by private-equity companies Trimaran Partners and Kier Group.

NRDC acquired Lord & Taylor from Federated Department Stores, now Macy's Inc., for $1.2 billion in June 2006. The company is a joint venture between real-estate developer William Mack and Lee Neibart, who are principals at private-equity concern Apollo Real Estate Advisors, and father and son Robert C. Baker and Richard A. Baker, co- owners of shopping-center developer National Realty & Development Corp.

Terms of the deal between Fortunoff, whose roots date to 1922, and NRDC aren't final, and the negotiations could still fall apart. But people familiar with the deal say the most recent scenario discussed calls for Lord & Taylor to begin opening Fortunoff boutiques within some of its 47 stores. The deal, should one ensue, is expected to close in March, one person close to the matter said.

News of a possible deal was reported Jan. 31 in the New York Times.

The likely acquisition of Fortunoff comes at a time of growing difficulty for U.S. department stores, which are clamoring for exclusive designer goods. It also follows months of lackluster sales by jewelers, which had an overall difficult holiday sales season in 2007.