Flower delivery company FTD filed for bankruptcy on Monday, saying its financial performance has wilted under the strain of integrating its acquisition of ProFlowers.
The nearly 110-year old company had been reviewing “strategic alternatives” since last year, warning in March that it could go out of business or shrink its operations if it didn’t find a buyer or raise enough money to pay back $217.7 million in debt due in September.
CEO Scott Levin said FTD had initiated Chapter 11 bankruptcy proceedings to “facilitate sales of our businesses as going concerns and to enable us to address a near-term debt maturity.”
FTD already has a definitive agreement to sell its North American and Latin American consumer and florist businesses, including ProFlowers, for $95 million to private-equity firm Nexus Capital. It also has signed letters of intent with potential buyers for its Personal Creations and Shari’s Berries businesses.
Existing lenders have agreed to provide up to $94.5 million in loans to fund FTD’s operations while it restructures.
Originally called Florists’ Telegraph Delivery Association, FTD was the world’s first flowers-by-wire service. It primarily functioned as a middleman, charging a transaction fee for taking customer orders, which were fulfilled and delivered by florists in its distribution network.
With the florist segment consistently achieving operating margins of nearly 30%, FTD bought ProFlowers for $430 million in 2014, taking on about $200 million in debt.
ProFlowers had a different business model, fulfilling orders directly through its own supply chain. According to Levin, the acquisition — FTD’s largest ever — was “designed to complement and enhance FTD’s existing businesses, ultimately driving greater profitability,” but the integration of ProFlowers with legacy brands never materialized, “resulting in the debtors running essentially independent … businesses.”
After ProFlowers “significantly missed” Mother’s Day forecasts last month, FTD faced a substantial liquidity shortfall that it could not bridge, Levin said in a court declaration.
He also noted that FTD has been under pressure from e-commerce companies that have “trained consumers to expect free or nominal cost delivery,” making floral service fees “anathema to many customers.”