In terms of mergers and acquisitions, 2002 went out with a whimper. Just 16 industry deals were transacted during the fourth quarter, down 24% from the fourth quarter of 2001 and 52% from the fourth quarter of 2000.
Most of the deals that were consummated this past fourth quarter had one thing in common: private equity money (see cover story “The Siren Song of Private Equity Money”). Says Craig Battle, managing director of Princeton, NJ-based investment bank Tucker Alexander, “That these financial guys want to put some of their money in the catalog business is an exciting thing.”
CATALOG AGE SPOTLIGHT ON FOURTH-QUARTER M&A
JP Morgan Partners relieves Federated
When: November
What: Roughly 10 months after putting all of its Fingerhut Cos. titles on the market, Federated Department Stores sold the Figi’s and Arizona Mail Order catalogs to JP Morgan Partners, the private equity arm of JP Morgan Chase & Co., and to Fingerhut executives Steve Lightman and Michael Sherman. Terms of the deal were not disclosed.
The Arizona Mail Order catalogs include women’s apparel and accessories titles Old Pueblo Traders, Bedford Fair Lifestyles, Willow Ridge, Brownstone Studio, Lew Magram, and Coward Shoes. Old Pueblo Traders and Coward are based in Tucson, AZ; food gifts catalog Figi’s in Marshfield, WI; and the other titles in Greenwich, CT. Now called Crosstown Traders, the collection of catalogs is run by president/CEO Lightman, formerly president of Arizona Mail Order, and vice chairman Sherman, former Fingerhut president.
The skinny: At press time, Federated had only one property remaining from the former Fingerhut Cos.: general merchandise catalog Popular Club. Its Bloomingdale’s by Mail catalog never fell under the Fingerhut Cos. umbrella.
Harbour Group buys Classic Chevy
When: December
What: Following through on its intent to acquire complementary businesses, investment firm Harbour Group bought Classic Chevy International, an Orlando, FL-based cataloger of Chevrolet and Camaro restoration parts. The company specializes in parts for 1955-1957 Chevy cars and trucks and for Camaros in most model years. Terms of the deal were not disclosed.
St. Louis-based Harbour Group had bought Corvette specialist Eckler Industries, a cataloger of aftermarket auto parts and accessories, in March 2002. In addition, Harbour Group’s Auto Meter Products unit sells specialty automobile gauges. Harbour Group, a holding company of primarily manufacturers, had about $1.5 billion in revenue in 2001.
The skinny: Could more acquisitions be forthcoming? It’s a good bet considering that chairman/CEO Sam Fox wants Harbour Group to be the market leader for restoration, parts, and accessories in the automotive enthusiast market.
Teva sold to Deckers Outdoor
When: October
What: Footwear manufacturer/marketer Teva agreed to be bought by footwear marketer Deckers Outdoor Corp. The cash and stock transaction was valued at approximately $62 million.
Teva’s assets include its $3 million-plus consumer catalog and Internet business. Goleta, CA-based Deckers has been selling Teva sports sandals since 1985; the brand accounted for two-thirds of Deckers’ sales last year. Deckers also includes the Simple Shoes catalog and footwear brand Ugg Australia, which it sells through retailers.
Deckers expects the acquisition to be accretive to its fiscal 2003 earnings before interest, taxes, depreciation, and amortization (EBITDA) by about $6 million, primarily as a result of the elimination of approximately $5 million of minimum annual royalties under the existing Teva license agreement.
The skinny: Teva is the Hebrew word for “nature.”
Airgas builds Detroit market presence
When: December
What: Thanks to its acquisition of $10 million Detroit-based distributor of gases and welding supplier Welding Metals, Airgas now has a foothold in the Motor City.
The nation’s largest distributor of gases, welding supplies, and related products, Airgas has three primary catalog vehicles: Airgas General Catalog, Airgas Safety, and Rutland Tool. According to Airgas spokesperson Jim Ely, Welding Metals product is available to customers through Airgas.com.
The acquisition includes four locations in the Detroit area: Madison Heights, doing business as Welding Metals; Roseville, doing business as Parkin Welding; and Rochester Hills and Lapeer, both doing business as Avon Welding. The locations are now part of Bay City, MI-based Airgas Great Lakes, which is one of 12 regional companies within Airgas.
The skinny: Airgas is keen to expand its turf via targeted regional acquisitions. In October 2001, Airgas acquired seven retail operations to beef up its southwestern presence.
Mrs. Beasley’s gobbles up baker
When: November
What: Baked goods manufacturer/marketer Mrs. Beasley’s bought $2.3 million bread manufacturer Buona Forchetta for an undisclosed amount.
Buona Forchetta sells breads to stores, hotels, and clubs in the Los Angeles area. Mrs. Beasley’s, which has a catalog, Website, and stores, will sell the product line in all of its channels. A Buona Forchetta Website will be rolled out this year, as will an expanded product line of nonperishable snack items.
The skinny: Watch out, fellow food catalogers. According to CEO Ken Harris, Mrs. Beasley’s is hungry for more food-related direct marketing acquisitions.
| Company | Market segment | Buyer/investor | Investment form | Est. price (in millions) | |
|---|---|---|---|---|---|
| OCTOBER | Golfsmith | Golf equipment | First Atlantic Capital | Majority investment | N/A |
| Teva | Footwear | Deckers Outdoor Corp. | Acq. of assets | $62.0 | |
| eTropicals.com | Pet supplies | Doctors Foster & Smith | Acq. of assets | N/A | |
| Catalog Link | Online shopping service | Altura International | Acq. of assets | N/A | |
| Zenith Technology | Telecommunications | Carnaby.com | Acq. of assets | N/A | |
| PayPal | Online payment service | eBay | Merger | $1,300.0 | |
| NOVEMBER | Potpourri Holdings | Gifts | Linsalata Capital Partners | Acq. of assets | N/A |
| Figi’s | Food products | JP Morgan Partners, S. Lightman, M. Sherman | Acq. of assets | N/A | |
| Arizona Mail Order | Apparel | JP Morgan Partners, S. Lightman, M. Sherman | Acq. of assets | N/A | |
| Buona Forchetta | Food products | Mrs. Beasley’s | Acq. of assets | N/A | |
| Athleta | Women’s sports apparel | Tokarz Group., Richmond Financial Group, Simon Property Group | Equity investment | $6.0 | |
| DECEMBER | Vitamin Shoppe Industries | Vitamins | Bears, Stearns & Co. | Acq. of assets | N/A |
| Classic Chevy International | Automobile parts | Harbour Group | Acq. of assets | N/A | |
| Old Glory Boutique Distributing | Rock music accessories | Alloy | Acq. of assets | $9.6 | |
| Welding Metals | Gases and welding supplies | Airgas | Acq. of assets | N/A | |
| Ashford.com | Jewelry | Diamond.com | Acq. of assets | $7.0 | |
| Source: Tucker Alexander, compiled from public information and other nonconfidential sources | |||||