A slow finish in 2007

Mar 01, 2008 10:30 PM  By

The fourth quarter wasn’t great for retail sales, and it wasn’t robust for industry mergers and acquisitions either. The volume of deals in the fourth quarter was down nearly 20% compared to 2006. This had a lot to do with the credit crunch, says David Solomon, co-CEO of New York-based investment firm Lazard Middle Market, which tracks transactions for Multichannel Merchant.

A prime example of the credit crunch effect: AmeriMark Direct’s purchase of Dr. Leonard’s Healthcare Corp., which was first announced in August, ultimately didn’t close until December. “A lot of deals got delayed — and a lot never happened at all,” says Solomon.

Conney Safety sold to Caxton-Iseman

When: October The facts: K+K America sold Conney Safety Products to private equity firm Caxton-Iseman Capital for $48 million. Conney Safety, a Madison, WI-based marketer of personal safety equipment supplies, had been owned by $528.8 million K+K America since October 1998; K+K America includes material handling and warehouse storage products catalog C&H Distributors, food services book Hubert Co., and National Business Furniture.

Caxton-Iseman’s portfolio companies have combined revenue of about $6 billion and 75,000 employees. The firm’s investment vehicles have available capital in excess of $2 billion. Caxton will use this as a platform for new acquisitions, Solomon says. The skinny: “I don’t think it’s that strategic,” Solomon says about the deal. “Caxton owns many businesses that are not synergistic with Conney. But we have seen that b-to-b direct marketers are very much in demand.”

FAO Schwarz acquires Best & Co.

When: November The facts: Upscale toy merchant FAO Schwarz acquired Best & Co., a luxury children’s apparel and accessories merchant. Terms of the deal were not disclosed. FAO Schwarz CEO Ed Schmults plans to grow Best & Co.’s catalog and Web channels and capitalize on synergies, though the brands will be kept separate.

In addition to its store in Greenwich, CT, Best also has a boutique in Bergdorf Goodman in New York. Schmults says that FAO plans to expand the Best & Co. brand through selective wholesale and international distribution. FAO is already expanding the toys section on the Best Website. “FAO is using Best as a high-end platform that complements its more mid-modern platform,” Solomon says. The skinny: Yes, FAO is a New York retail institution, but so is — or was — Best & Co. An upscale New York-based department store for nearly 100 years before it closed in 1971, Best was featured in the 1972 movie classic The Godfather. Susie Hilfiger (former wife of designer Tommy Hilfiger) bought an existing children’s boutique in Greenwich in 1997 and renamed it Best & Co. after the former retailer.

AmeriMark finally buys Dr. Leonard’s

When: December The facts: AmeriMark Direct officially bought fellow multititle cataloger Dr. Leonard’s Healthcare Corp. four months after news of the deal came out. Terms were not disclosed. The $220 million-plus Dr. Leonard’s Healthcare Corp. mails 90 million Dr. Leonard’s catalogs of home healthcare products for seniors. The company distributes about 101 million copies of its Carol Wright Gifts book annually. AmeriMark’s titles include Anthony Richards, Beauty Boutique, Complements by Anthony Richards, Essentials by Anthony Richards, Healthy Living, Time for Me, The Feel Good Store, and Windsor Collection.

Solomon believes both companies will benefit from an “uplift in demographic,” adding that the senior population is the fastest selling demographic today. “Both companies recognize that to serve the new customer you have to respond to the notion that they don’t think of themselves as old.” The skinny: Dr. Leonard customers are an older demographic, Solomon says, with “more of a medical feel,” while AmeriMark focuses more on wellness to a more “youthful” senior crowd. “It’s a very interesting dynamic because the age demographic is quite fragmented and you can’t do one size fits all.”

4Q 2007 CATALOG INDUSTRY TRANSACTIONS
Company Market segment Buyer/investor Investment form Est. price (in millions)
OCT. Nivel Parts & Manufacturing Co. Golf car parts/accessories Audax Group Acquisition NA
Astral Direct Home decor, gifts Stewart Capital Management Acquisition NA
Photoworks Photography services AG Interactive Acquisition $26
Conney Safety Products Safety and first-aid products Caxton-Iseman Capital Acquisition $48
Universal Cos. Spa and skincare products Hunt Private Equity Group Acquisition NA
NOV. Double Bull Archery Sporting goods Primos Acquisition NA
Elizabeth Lange Maternity clothes Bluestar Alliance Acquisition NA
Best & Co. Children’s apparel FAO Schwarz Acquisition NA
Mitchell & Ness Nostalgia Co. Vintage sports apparel Adidas AG Acquisition NA
DEC. Keepsake Quilting Quilting fabric and supplies New Track Media Acquisition NA
CompUSA Technology products/services Gordon Brothers Group Acquisition NA
Dr. Leonard’s Healthcare Corp. Healthcare products AmeriMark Direct Acquisition NA
Overton’s Specialty water sports Gander Mountain Co. Acquisition $70
Source: Lazard Middle Market