Federal department stores to acquire Fingerhut for 26.2 times earnings

The Deal: Federated Department Stores has agreed to acquire Fingerhut in a cash deal valued at $1.5 billion. Fingerhut shareholders will receive $25/ share in cash and Federated will also assume $470 million in Fingerhut debt. The move will give Federated, the parent of such stores as Macy's and Bloomingdale's a major boost in direct selling to shoppers through catalogs and the Internet. Fingerhut will become a subsidiary of Federated but will remain based in Minnetonka. Federated says the deal will reduce its earnings, but declined to say by how much. On the news, Fingerhut flew $5.625, or 30%, to $24.4375/share, while Federated was down $2.125, or 5.3%, to $40.375/share.