American Greetings Corp. said Tuesday that it reached a deal with party goods maker Amscan Inc. and will stop making its own party goods. The move will result in a plant closing and about 225 facility-related job cuts.
Spokeswoman Patrice Sadd said American Greetings will close its Kalamazoo, Mich. plant, with manufacturing expected to end in April. The company will make a decision by the end of February regarding when distribution will wind down.
The Kalamazoo facility employs 225 people. Sadd said approximately 12 jobs will also be eliminated from the company's Cleveland headquarters. All of the positions are expected to be phased out between December and March.
The greeting card company said it anticipates a $25 million cash payment related to the transaction as well as a warrant to buy about 2 percent of the stock of Amscan's parent company, AAH Holdings Corp.
The alliance means American Greetings will get its party goods from Amscan and will distribute the products to its mass, drug, grocery and specialty retail partners. The agreement also gives Amscan exclusive rights to make and distribute products into outlets such as party stores.
American Greetings said the deal allows it to offer a bigger variety of party goods products to its retail partners. The company anticipates impairment costs of about $10 million to $15 million related to the transaction. It also expects plant closing costs, which will mostly be for severance pay to workers, but has yet to determine the exact amount of those costs.
Shares of American Greetings added 79 cents, or 3.4 percent, to $24.06 in afternoon trading. The stock hit a new 52-week high of $24.27 earlier in the session.