updated 1/8/2005 12:25:45 AM ET 2005-01-08T05:25:45

Twin Cities entrepreneur Tom Petters plans to buy Polaroid Holding Co. for $426 million, his company announced Friday.

Waltham, Mass.-based Polaroid, best known for its instant picture cameras and sunglasses, has seen digital photography badly erode its market share.

“I’m really excited about it,” Petters said from the Consumer Electronics Show in Las Vegas. “It’s a great brand. It’s a brand that has stayed in consumers’ minds.”

The Minnetonka-based Petters Group Worldwide plans to absorb Polaroid into its consumer brands business, which sells electronics and other goods to major retailers such as Wal-Mart, Target and Best Buy.

The two companies said they believe the deal will create a “global leader in imaging and consumer electronics” that will extend the Polaroid brand to products “for the digital age,” such as plasma TVs.

Polaroid and Petters already have a relationship. For the past two years Petters Group has been a Polaroid licensee, putting the brand on DVD players and televisions.

Petters, 47, whose privately held company also owns the Fingerhut consumer catalog company and other specialty businesses, called the Polaroid deal his “biggest and probably the best one.”

Polaroid introduced its first instant camera in 1948. Its sales peaked in 1991 with annual revenue of almost $3 billion. Competition from digital picture technology, a hostile takeover attempt and a major patent challenge led Polaroid to file for Chapter 11 bankruptcy protection in 2001, with about $1 billion in debt.

Polaroid’s assets were sold for $255 million to a private equity affiliate of J.P. Morgan Chase & Co. called One Equity Partners, which took the scaled-back Polaroid public again last spring.

The deal values Polaroid at $12.08 a share in cash, a 13 percent premium to the $10.70 per share it traded at before the announcement. One Equity still holds 53 percent of Polaroid’s stock and supports the deal.

The deal requires shareholder and regulatory approval and is expected to be completed in the second quarter.

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