Deal making dwindles

If industry watchers were expecting a flurry of post-postal rate hike mergers and acquisitions, that hasn’t happened — at least not yet. The third quarter brought 13 deals, compared to 16 last year. And these weren’t distress deals, either.

“If you look at the buyers, most of these deals are strategic in nature,” says David Solomon, managing director for Goldsmith Agio Helms/Lazard Middle Market, the investment bank that tracks mergers and acquisitions for Multichannel Merchant. But if the fourth quarter isn’t a good one, it may force more marketers to sell or merge to stay afloat.

Dynatronics Grabs Six Therapy Distributors

When: July The facts: Dynatronics Corp. acquired six of its key independent distributors — Rajala Therapy Sales Associates; Responsive Providers; Therapy and Health Care Products; Cyman Therapy; Al Rice and Associates; and Theratech. According to a release, Salt Lake City, UT-based Dynatronics paid a total of about $8.3 million for the six companies, which included $3.3 million in cash and 4.6 million shares of Dynatronics common stock. Solomon refers to Dynatronics as a “small mom-and-pop” company, whose stock price grew about 30%, to $1.72 per share, after the deal was announced. “It’s a very fragmented business,” he says. “They bought up six very small distributors, and Dynatronics is trying to aggregate all of these small players into a very narrow niche. The strategy is to get breadth and scale to grow the business.” The skinny: Before the deal, Dynatronics was a $19 million business. After the acquisition, Dynatronics is expected reap an additional $15 million per year in sales.

Cabela’s Looks To Canada

When: August The facts: Outdoor sporting gear cataloger/retailer Cabela’s is staking a strategic claim in Canada by acquiring S.I.R. Warehouse Sports Store, a Winnipeg-based retailer of hunting, fishing, camping, and related outdoor merchandise. S.I.R. was founded in 1924 by Sydney Isaac Robinson and includes a mail order operation and 44,000-sq.-ft. store in Winnipeg’s busiest shopping district. Founded in 1961, $2.06 billion Cabela’s went public in 2004. Sidney, NE-based Cabela’s knows how to build stores, “but to get the right location in Winnipeg might have taken time,” Solomon says. “This gives them more distribution capability faster.” The skinny: Cabela’s is serious about the Canadian market: It plans to build one of its trademark destination stores at the proposed Lac Mirabel development in Montreal. The S.I.R. deal “gives them a beachhead,” Solomon says. “I’m guessing that the Winnipeg location is very consistent with the roots of Cabela’s.”

Redcats reels in United Retail

When: September The facts: New York-based multititle cataloger Redcats USA bought United Retail Group for $198.9 million, or $13.70 per share in cash. United Retail Group is a specialty retailer of plus-size women’s fashion apparel. Both companies’ boards of directors approved the deal, which is expected to close by the end of the calendar year. Rochelle Park, NJ-based United Retail Group operates 483 Avenue stores along with the Avenue.com Website. Redcats USA’s brands include Chadwick’s, Roaman’s, Woman Within, Jessica London, KingSize, and BrylaneHome. This isn’t the first time these two companys have teamed up: Redcats had developed an 84-page Avenue catalog for United Retail in March 2006. (It wasn’t Avenue’s first stab at cataloging; it had mailed an apparel book for nearly three years before closing the title in 2003.) “It looks like a big retail expansion,” Solomon says. “They’ve worked together and done the Avenue catalog and developed some comfort. It makes sense to have penetration in each of these channels. It’s a very similar customer.” The skinny: Having a balance between retail and direct is a growing trend, Solomon says. “This is a market share and channel play, reinforcing all existing operations.”

3Q 2007 CATALOG INDUSTRY TRANSACTIONS
Company Market segment Buyer/investor Investment form Est. price (in millions)
JUL. Al Rice and Associates Therapy equipment Dynatronics Corp. Acq. of Equity NA
SureFit Footwear Specialty Prosthetics Systems Acq. of Equity NA
Hickory Farms Specialty foods Sun Capital Partners Acq. of Equity NA
Dimensions Leisure products Wilton Products Acq. of Equity NA
Stone Tool Supply Stone-cutting tools Pearlman Corp. Acq. of Equity NA
PixelPlay Home entertainment Oberon Media Acq. of Equity NA
AUG. Outdoor Power Automotive retail Ramsey-Waite Co. Acq. of Equity NA
Cigars International Cigars Swedish Match AB Acq. of Equity NA
S.I.R. Warehouse Sports Store Outdoor merchandise Cabela’s Acq. of Equity NA
AJ Prindle & Co. Automotive accessories Banyan Enterprises Acq. of Equity NA
SEPT. Kellwood Co. Apparel Sun Capital Partners Acq. of Equity $1,001.4
United Retail Group Apparel Redcats USA Acq. of Equity $198.9
Davis Instruments Scientific instruments Thermo Fisher Scientific Acq. of Equity NA
Source: Goldsmith Agio Helms/Lazard Middle Market, compiled from public information and other nonconfidential sources

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