Paragon Gifts Sold

Private equity firm Reliant Equity Investors has acquired Westerly, RI-based The Paragon Gifts Holdings, parent of gifts titles The Paragon and Bits and Pieces, from a group of private investors, including principal shareholders of New York-based Wand Partners. Reliant formed BlueSky Brands for the purposes of the acquisition. Terms of the transaction were not disclosed.

Though sales figures were not disclosed, Paragon and Bits and Pieces are estimated to have annual sales of more than $60 million. The Paragon has 669,000 12-month buyers; Bits and Pieces has 310,000 12-month buyers in the U.S. and 13,000 in the U.K.

Reliant has named Richard T. Hebert, an investor in BlueSky and a direct marketing veteran, as BlueSky’s chief executive officer. Alan Segal, founder/president of Bits and Pieces, has joined BlueSky and will serve as executive vice president of merchandising. Stephen Rowley, CEO of Paragon Gifts Holdings, will serve as an adviser and consultant to BlueSky.

“These acquisitions will form the nucleus of our emerging portfolio of direct-to-consumer marketing businesses,” Herbert said in a release. “Our vision is to acquire, integrate, and grow a family of leading multichannel direct-to-consumer marketing companies focused on the sale of gifts and household products to the middle market. Catalog buyers have been rapid adopters of online and other direct shopping channels. We intend to use these brands to help establish BlueSky as a leader in this segment of the retail market and to capitalize on the opportunities presented by the fast growth in direct-to-consumer marketing.”

This deal is yet another example of an equity house acquiring a platform catalog business, says Larry J. West, president of New York-based catalog intermediary West Cos., who, along with Jim Adams, advised Wand Partners in the deal.

West says that the Paragon and Bits and Pieces businesses are large enough to be a platform (at least $50 million in revenue), and have economies of scale in merchandise buying/importing; catalog production; Website marketing; management; systems; and order processing.

“This reflects favorably on our industry as an investment vehicle,” West says. “Yes, [the catalog industry] is becoming more a game of the big dogs, yet many smaller catalogers via their founding entrepreneurs are the very backbone of a lot of what happens in this industry. And they will remain a major factor unlike what some know-it-all futurists see in their cloudy crystal balls, as these smaller companies continue to exhibit some of the very best merchandising from proprietary product development with more than 65% gross margins.”

Senior debt financing for the Paragon transaction was provided by Sovereign Bank New England, a subsidiary of Sovereign Bancorp of Philadelphia; subordinated debt was provided by Smith Whiley & Company of Hartford, CT. DLA Piper Rudnick Gray Cary acted as legal adviser to Reliant and BlueSky during the transaction. Skadden Arps Slate Meagher & Flom acted as legal advisers.