American Greetings, the second largest greeting card company in the U.S. behind Hallmark, has bought the debts of struggling Clinton Cards, the largest card retailer in the UK, in an action akin to a hostile corporate takeover. The unusual move essentially puts American Greetings in control of Clinton's fate and is expected to force the retailer into administration, the British form of bankruptcy.
American Greetings is the biggest supplier to Clinton Cards, which operates 628 Clinton Cards stores and 139 "Birthdays" outlets throughout the UK, employing over 8,000 people, whose jobs could now be at risk. Clinton was unable to repay a 35 million pound loan (more than $56 million) to its banks so the firm "had no option but to agree to a proposal by the new owner of the debt," reports Reuters.
The American invasion clearly took the British retailer and many industry observers by surprise.
Nick Bubb, an independent analyst, told Reuters that "The supplier [American Greetings] has pulled the rug, so it's be no means a usual sequence of events. The question really is why the supplier hasn't been more supportive." But analysts in London "speculated that American Greetings could be preparing to buy Clintons Cards out of administration," according to London's The Telegraph. "That way it would be able to cherry-pick the assets it wanted without taking on any of the company's liabilities."
The high street retailer has been financially troubled for some time, and has been hurt by competition from supermarkets and online e-cards. The company recorded a pre-tax loss of 3.7 million pounds in the 26 weeks up to January 29, 2012, vs. an 11.7 million pound profit in the previous year. Shares on the London Stock Exchange have plummeted, losing more than 80 percent of their value since January 2010.
American Greetings has made its share of British acquisitions before. The Cleveland, Ohio company bought a trio of UK greeting card companies — Rust Craft, Celebration Arts Group and Andrew Valentine — in the 1980s and merged them into its Carlton Cards unit, according to Retail Week. With additional acquisitions, including Camden, Gibson Greetings, Hanson White, Watermark, and others, American Greetings was able to form "UK Greetings," which says it employs about 3,500 people and owns "the highest market share in greeting cards manufacturing in the UK." Its cards are sold via Clinton Cards and other retailers.
With global revenues of about $1.6 billion, American Greetings seems well positioned to continue its march on the British market — while British workers and customers at Clinton Cards are bracing for shop closures and layoffs. As it turns out, Clinton has a card for that possibility.