FAO Schwarz to reopen in N.Y., Vegas

0 Comments | Deseret News (Salt Lake City), Jan 27, 2004 | by Associated Press

PHILADELPHIA -- The flagship FAO Schwarz toy store on New York's Fifth Avenue will be preserved as a "cultural treasure," an investment firm acquiring parts of bankrupt FAO Inc. for $41 million said Monday.

"FAO Schwarz is more than just a toy store," said David E. Shaw, chairman of the New York investment firm D.E. Shaw & Co. Inc., noting that the Manhattan landmark carried "a great deal of meaning to millions of children and former children."

The purchase of FAO Schwarz stores in New York and Las Vegas and the company's Internet and catalog businesses from King of Prussia- based FAO Inc. was approved Monday by Judge Joel B. Rosenthal in U.S. Bankruptcy court in Wilmington, Del.

The New York and Las Vegas stores will reopen after four to six months of renovation, said Jerry R. Welch, president of FAO Inc.

The stores will focus on distinctive, high-end specialty toys, said Max Holmes, a D.E. Shaw managing director and head of the company's distressed securities group. The company will also concentrate on Internet and catalog sales, which are expected to be even more profitable.

"We want to be the Neiman Marcus or the Harrods of toys," Holmes said. "We need to show that we can operate two stores that are really beautiful and operate them well, and maybe three or four years from now open in another city."

Holmes said the sale price was double the $20 million figure that had been announced Dec. 26, as a result of competitive bidding at a Jan. 22 auction. Other bidders included Q Investments and a joint venture formed by Hasbro and Harry Macklowe, chairman of Macklowe Properties, owner of the General Motors building where the New York FAO Schwarz store is located.

FAO Inc. filed for bankruptcy Dec. 4, less than seven months after emerging from an earlier bankruptcy, struggling to compete with discount stores offering many of the same toys at much lower prices. The company has said it doesn't expect holders of its common stock to recover any of their investments.