Deals Pick up in December

Mar 01, 2010 10:30 PM  By

2009 Ended Quite a bit Stronger than 2008 when it comes to industry mergers and acquisitions. Fourteen catalog-related deals went down in the last three months of the year — half of those coming in December — compared to seven deals in the fourth quarter of 2008.

Economic challenges, including slowdowns due to lack of financing and lack of confidence in near-term results, some financial experts tell us, affected M&A activity in the fourth quarter of 2009 as well as throughout most of the year.

But more companies began considering the acquisition of businesses, and other merchants started thinking about selling — dialogue that bodes well for activity in 2010, says Lee Helman, managing director with New York-based investment firm Financo.

“Credit has slowly opened up a bit and there is a big pent up pool of capital,” he says. “Private equity has to put funds to work. Expect a big rebound in activity in 2010 as companies feel good about having stabilized their businesses and taken measures to be lean and mean.”

One of the notable fourth-quarter catalog deals involved multititle mailer 1-800-Flowers.com, which announced in December the sale of its home and children’s gifts business. PH International, an affiliate of Evergreen Enterprises (a manufacturer and wholesaler of home decor and garden products) bought the unit for $17 million.

Another December deal involves medical, dental and veterinary supplies merchant Henry Schein buying Butler Animal Health Supply. Schein has combined its U.S. Animal Health businesses and Butler into a new company called Butler Schein Animal Health. Schein’s U.S. Animal Health business includes its telesales and field sales organizations as well as NLS, which it acquired in 2006.

And to beef up its Science Education portfolio, VWR Education acquired X-treme Geek, which sells high-tech gadgets, novelties and science-related gifts. X-treme Geek will supplement VWR Education’s product mix from the Edmund Scientific brand and provide it with another opportunity to sell to consumers vs. institutions.

It’s surprising that so many deals got done during the quarter, “as most operators kept their blinders on and tried to muscle through a holiday period that they expected would have significantly less demand than in recent years,” Helman says.

Many marketers were keeping their heads down and just trying not to get stuck with a lot of excess or unsold inventory, Helman says. “So most catalogers chased business instead of getting out in front of it.” Hopefully, merchants will be more optimistic and aggressive in 2010.

4Q 2009 CATALOG INDUSTRY TRANSACTIONS

Company Market segment Buyer/investor Investment form Est. price (in millions)
OCT. Bike Riders Adventure travel Backroads Acquisition NA
Cabela’s Sporting goods/apparel RDE Acquisition Co. Acquisition NA
Kim Supply Carwash equipment Amnis Acquisition NA
Tall Girls Women’s apparel Long Tall Sally Acquisition NA
X-treme Geek High-tech gadgets VWR Education Acquisition NA
NOV. Timothy’s Coffee Coffees, coffee stores Green Mountain Coffee Roasters Acquisition $157.0
Swell.com Online boardsports Billabong International Acquisition NA
DEC. 1-800-Flowers.com Home/children’s gifts PH International Acquisition $17.0
Bliss World Holdings Spas, skincare products Steiner Leisure Ltd. Acquisition $100 million
Butler Animal Health Supply Veterinary supplies Henry Schein Acquisition NA
Diedrich Coffee Coffee and tea manufacturer Green Mountain Coffee Roasters Acquisition $290
Fitch Industrial & Welding Supply Gas and welding supplies Airgas Acquisition NA
M&S Fine Foods Specialty foods MA Holdings Acquisition NA
Trudy Corp. Children’s educational products MMAC Acquisition
Asset purchase