Fingerhut Cos., known for marketing consumer goods through catalogues, television, and other media, is looking for an early Christmas present.
The Minnetonka, Minn.-based company plans to spin off its financial services unit in the lucrative fourth quarter, when consumers' holiday spending peaks.
The unit, which has been renamed Metris Cos., registered an initial offering last month with the Securities and Exchange Commission of about 2.8 million shares of common stock at $14 to $16 a share. Metris will grant underwriters a 30-day overallotment option to buy up to 425,000 additional shares.
After the offering, Fingerhut will own about 85% of the outstanding shares in Metris, which is led by credit card veteran Ronald N. Zebeck.
The two have agreed to maintain a close business relationship. Metris has exclusive rights to mine Fingerhut's proprietary data base of more than 30 million consumers. Slightly more than half of Metris' cardholders are Fingerhut customers.
Mr. Zebeck, president and chief executive of Metris, was hired by Fingerhut in 1994 to create a credit card program. That year, in Salt Lake City, he formed Direct Merchants Credit Card Bank.
Direct Merchants began issuing MasterCard-branded cards in 1995. By midyear, Metris - formerly known as Fingerhut Financial Services Corp. - reported having 1.1 million cards and $1.06 billion in loans outstanding.
"No matter where he's gone, he's been effective," Frank Caruna, a bank card consultant, said of Mr. Zebeck, the former general manager of the General Motors MasterCard. "In different environments he has come through building something to be reckoned with."
Metris also markets extended-service plans and fee-based products and services, such as membership clubs, card registration, and third-party insurance offerings.
Metris said it wants to expand its offerings to include other financial products, such as home equity, auto, and student loans.
In its prospectus, Metris said that households with incomes ranging from $15,000 to $35,000 - about 31% of all households - have been underserved by its competitors.
Metris uses a risk-based strategy using the Fingerhut data base and credit scoring systems to find appropriate customers for secured and unsecured cards, the prospectus said. The company is also looking for non- Fingerhut customers through credit bureau information.