American Capital Buys Potpourri Group –

Splitting time between home and work duties takes its toll. People barely have free time to do anything these days, let alone go shopping Luckily, retailers are catching on and expanding direct marketing strategies, which will allow people to evade a time-consuming, in-store shopping experience.

Aware of this trend, American Capital Strategies Ltd. put some of its eggs into the direct marketing basket with its $188 million investment in the buyout of Chelmsford, Mass.-based Potpourri Group Inc. (PGI), a multi-titled catalog company specializing in home decor, apparel and giftware products, targeted at middle- to upper-middle class women between the ages of 40 and sixty.

“The direct marketing industry in general is particularly appealing to us given the fundamentals behind it and the way people are purchasing these days,” said Brian Graff, regional managing director of American Capital.

According to Graff, PGI is appealing to women “who increasingly rely on the convenience, speed and ease of catalog shopping due to the greater demands placed on them at the workplace and at home.”

American Capital bought PGI from Linsalata Capital Partners Inc., and Goldsmith Agio Helms was the sell-side advisor on the deal. American Capital believes it won the deal in a competitive bid process, in part, because of its solid rapport with the management team.

“We are looking to support the management team in their business plan and the strategy they have executed in the past,” said Graff.

While American Capital plans to keep current management, led by CEO Jonathan Fleischmann, it also plans to nurture PGI management’s two-fold plan, which has been to develop new titles and increase circulation, as well as to keep an eye out for other interesting acquisition opportunities.

“We are open-minded about acquisition opportunities we’d like to see, and we will look for these types of entities,” said Graff.

American Capital declines to breakdown the debt to equity ratio of the deal, however the firm did say it used senior term loans, senior and junior subordinated debt and redeemable and preferred common equity to complete the deal.

PGI, which took in approximately $160 million in revenue in the fiscal year ending Mar. 31, 2005, was founded in 1963, publishing a single catalog title. It has grown over the years and now includes 12 catalog titles. Potpourri, Northstyle and Expressions are among the most well-known.

“One of the things we liked about PGI was that it had quite a breadth of unique and somewhat proprietary types of products,” said Graff.

As for an exit, Graff said that American Capital will likely sell PGI to another financial or strategic buyer; however, as of now, there is no definitive time frame.

American Capital has resources of approximately $5.4 billion, which it raised from the public market. This is American Capital’s eighth buyout of 2005.