Exhibit 2
FOR IMMEDIATE RELEASE
Monday, December 5, 1994
MONTGOMERY WARD EXPANDS STRATEGIC HOME
SHOPPING ALLIANCE WITH VALUEVISION
Obtains Equity and Warrants for Major Stake in ValueVision
Montgomery Ward to Appoint Two Directors to ValueVision Board
ValueVision Reaches Agreement in Principle with Time Warner Cable
to Add up to 2.0 Million Full-Time Cable Homes
MINNEAPOLIS, MN, December 5, 1994 -- Montgomery Ward, the largest privately
held retailer in the U.S. and ValueVision International, Inc. (NASDAQ:VVTVA),
the nation's third largest home shopping network, today announced signing an
agreement in principle to enter a 10 to 20-year equity and license and service
agreement. Through this agreement Montgomery Ward will purchase an initial
4.7% stake in ValueVision for $8 million at $6.25 per share.
The companies expect to begin a joint marketing program for a broad
range of merchandise. This follows successful test marketing of ValueVision
programming for Montgomery Ward's big-ticket and brand-name merchandise that
began airing over the ValueVision home shopping network last August. Under
the agreement, the Montgomery Ward credit card will be eligible for use in all
purchases by ValueVision customers. In addition, Montgomery Ward may
contribute advertising resources to carriage agreements that ValueVision
reaches with multiple system cable operators.
Under the terms of the agreement in principle, ValueVision also will
issue 25 million warrants to Montgomery Ward, vesting over a five-year period
to purchase shares of ValueVision stock at prices ranging from $6.50 to $17.00
per share, for an average purchase price of $9.16 per share. If fully
exercised, purchase of these warrants would result in Montgomery Ward owning
over 49% of the outstanding shares of ValueVision common stock. Montgomery
Ward will have preemptive rights to preserve its equity position. The
agreement is subject to satisfaction of several conditions, including
negotiation of a definitive agreement, which must be approved by each
company's board of directors and ValueVision's shareholders, as well as
ValueVision's receipt of a fairness opinion, regulatory approvals and
completion of due diligence by Montgomery Ward.
Montgomery Ward will fill two seats to be added to ValueVision's board
of directors, bringing the number of ValueVision board members to seven. Gene
McCaffery, executive vice president of Montgomery Ward, and Dominic Mangone,
former chief financial officer of Montgomery Ward and currently a consultant
to the company, are expected to join the ValueVision board, with McCaffery
also serving as a vice chairman of the board.
Building on Montgomery Ward's Strengths in Products for the Home
"This partnership with ValueVision is a good fit with Montgomery Ward's
strategy for growth," said Bernard F. Brennan, Montgomery Ward chairman and
chief executive officer. "It builds on our strength in marketing products for
the home and offers customers a convenient way to shop for big-ticket
merchandise.
"As a result, we can serve customers through our retail stores, through
our specialty catalog, through our affinity marketing programs and through
home shopping. An additional benefit of this partnership is the penetration
we gain in markets we currently do not serve, as well as those targeted for
future growth," Brennan said.
Powerful Marketing Arm
"The partnership with Montgomery Ward represents the initial realization
of our vision to serve as a powerful marketing arm for major retailers," said
Robert L. Johander, ValueVision's chairman and chief executive officer.
"Through this agreement ValueVision builds on the credibility of a 120-year-
old retail organization with a strong consumer franchise and mass
merchandising resources.
"The agreement is expected to lower many of our merchandise costs while
significantly broadening our brand name product mix to a level that,
otherwise, would require an increase of about 100 times our current buying
power," Johander added. "Profit margins may also be increased through sale
of membership services such as those offered through the Montgomery Ward
Signature Group, Montgomery Ward's direct marketing organization."
Montgomery Ward Credit Card
The agreement will enable ValueVision customers to make purchases using
a Montgomery Ward credit card. Program offerings will include an "Express
Credit" option for qualified customers to obtain a Montgomery Ward credit card
and select extended credit payment terms.
"Montgomery Ward's quick and convenient credit card program, which has
ten million active cards, will enhance the appeal and diversity of our
merchandise, allowing us to differentiate our programming by adding high-end
electronics, appliances and furniture," Johander continued. "Montgomery
Ward's nearly 400 retail stores provide enormous value to increasing our
negotiating leverage for quantity purchases or manufacture of celebrity and
proprietary goods."
During test marketing last August, the two companies launched big-ticket
and brand name merchandise program segments featuring Montgomery Ward's
"Electric Avenue & More" specialty retail format. The companies are
evaluating over forty Montgomery Ward shows for production. Scores of brand
names will be featured in this programming, which is expected to begin airing
in early 1995 over ValueVision's television home shopping network.
Montgomery Ward Advertising on Cable
Johander explained that the incentive of Montgomery Ward advertising is
expected to prove instrumental in adding viewers for ValueVision through long-
term affiliation and other agreements with additional cable operators. "The
long-term agreement in principle that we have reached with Time Warner Cable,
which was negotiated concurrent with the Montgomery Ward discussions, is a
good example of the significance of our initial partnership with Montgomery
Ward," Johander said.
"We may even enhance relationships and further increase our stature in
the cable community through creation of cooperative cable TV marketing centers
within Montgomery Ward's nationwide store network," Johander said.
In a separate release, ValueVision today reported that it has reached
an agreement in principle with Time Warner Cable to launch ValueVision
programming in up to an additional 2.0 million full-time homes and convert
500,000 existing full-time homes to this seven-year agreement. The agreement
is expected to bring to 3.3 million the number of total cable homes that
ValueVision reaches on Time Warner Cable. The agreement is pending a final
survey of individual systems by Time Warner of cable system capacity and start
dates. This survey is expected to be completed within the next few days.
Additional Retail Marketing Candidates
Johander concluded by stating, "While Montgomery Ward must approve any
additional marketing deals with retailers, this may not be the only retailer
served by the ValueVision shopping network. We see many potentially
acceptable candidates in the U.S. and abroad."
Montgomery Ward operates a chain of more than 380 value-driven specialty
stores in 39 states. The Company also owns and operates Electric Avenue &
More, a chain of stores in mid-size markets that offer products for the home;
The Signature Group, the third largest direct marketing company in the U.S.;
and Lechmere, a dominant retailer of home products in the Northeast.
Montgomery Ward's 1993 revenues were $6 billion. Its 1994 revenues are
expected to exceed $7 billion.
ValueVision International, Inc. is the third largest home shopping
retailer in the United States. The proposed agreement with Time Warner is
expected to increase the number of cable homes reached by ValueVision to
approximately 14 million, with the company's full-time cable homes growing to
5.4 million. ValueVision's twenty-four hour per day programming is currently
available to approximately 11.9 million cable homes. Approximately 3.4
million cable homes receive ValueVision programming on a full-time basis
through block lease agreements, affiliations with cable systems and broadcast
outlets. As of October 31, 1994, the company had approximately 6.7 million
full-time equivalent cable homes.
A registration statement relating to the sale by certain ValueVision
selling stockholders of an aggregate 1,308,451 shares of common stock has been
filed with the Securities and Exchange Commission but has not yet become
effective. ValueVision will receive no proceeds from such sales. This
communication constitutes neither an offer to sell nor a solicitation of an
offer to buy the common stock.
For additional information on ValueVision International, Inc. via
facsimile at no cost, simply call 1-800-PRO-INFO and dial client code #158.