Party America To Buy Rival Chain

By Alec Rosenberg
BUSINESS WRITER Saturday, August 09, 2003 - Alameda retailer Party America has agreed to buy bankrupt rival Paper Warehouse and its franchising division for $7 million.

Party America will add more than 100 party-supply stores in the deal, tripling its yearly revenue to $150 million, Chief Executive Marty Allen said Friday.

Privately owned Party America has 38 stores in California, Colorado and Utah, including Larkspur, Pleasant Hill, Redwood City, Union City and Vallejo.

The deal will give Party America about 70 company and 70 franchise stores, as it will close some Paper Warehouse shops and make some franchises, Allen said.

Minnesota-based Paper Warehouse is a Midwest-focused chain with 113 stores in 24 states -- 62 corporate stores and a franchising unit that licenses the Paper Warehouse and Party Universe names to 51 franchise stores.

"They were in markets we were not," Allen said. "It's a chance to dramatically expand our company very quickly and it fit into our long-term strategy."

The deal is expected to close by Aug. 18. The combined firm will be privately owned, based in Alameda and will use Party America's name, Allen said.

Publicly traded Paper Warehouse filed for Chapter 11 bankruptcy protection in June and closed 24 stores, citing events after Sept. 11, a weak economy and war in Iraq. It lost $4.2 million last year on revenue of $75.2 million.

Party America itself has survived bankruptcy, filing for Chapter 11 protection in July 1997 after a failed merger with Party World. It emerged six months later, as Allen helped turn it around, closed 21 stores and attracted a new owner, Gordon Bros. equity group.

Party America has since posted five straight years of record sales growth and profit. Sales rose 11 percent last year and are nearing $50 million this year.

Party America has around 500 employees and Paper Warehouse 659.