$1 Billion Deal Near for Dulles Firm N.E.W.

By Terence O'Hara
Washington Post Staff Writer
Friday, July 28, 2006

N.E.W. Customer Services Inc., a Dulles company that has become the biggest independent provider of extended product warranty programs, is close to being sold for about $1 billion, according to sources with knowledge of the deal.

The sources, who spoke only on the condition of anonymity because they were not authorized to speak publicly for the company or its investors, said the deal was still at least a week away from completion. The sources did not identify a buyer.

A company spokesman declined to comment.

N.E.W., founded 23 years ago by law student Fred Schaufeld, has attracted millions of dollars in recent years from private investors. It has grown rapidly, selling its highly profitable extended warranty plans on consumer electronics such as DVD players and big-screen televisions.

Though it has sold extended warranties and service contracts to 150 million customers, marketing through retailers such as Sharper Image and Wal-Mart, the company itself is not well known. N.E.W. has almost 3,000 employees here and at service centers throughout the country -- it is one of Rapid City, S.D.'s fastest-growing employers -- who take customer complaints and fix or replace broken products.

Consumer advocates argue that extended warranties are not worth the money, because the cost is often more than that of statistically infrequent repairs on many products. However, with the rapid spread of such new products as plasma-screen TVs whose long-term reliability isn't established, even longstanding critics such as Consumer Reports say that some extended warranties can be worthwhile. N.E.W. says that customers are not only paying to protect their products, but for the convenience of receiving repairs or replacements in a matter of days.

The company is now owned by Schaufeld and his management team, along with private equity firms TH Lee Putnam Ventures of Boston and Freeman Spogli & Co. of Los Angeles. When the firms bought their stake in N.E.W. in 2004, the company was valued at $370 million. Schaufeld and his management team will likely remain in place and could retain a significant stake in the company after the sale, one source said.

Representatives at TH Lee and Freeman Spogli did not return phone calls. News of the pending sale was reported yesterday by the Daily Deal newspaper.


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