Deal market in hibernation for Q4

Mar 01, 2005 10:30 PM  By

Deal-making bears spent the fourth quarter of 2004 hibernating, judging from the scarcity of industry mergers and acquisitions during the time. Only 11 deals were consummated during the quarter, compared with 16 deals during the fourth quarter of 2003 and 21 mergers and acquisitions in the first three months of 2004.

Because the fourth quarter is so essential to so many companies, owners “are not going to start an acquisition process and take the focus off their core business,” says Craig Battle, managing director of Princeton, NJ-based investment bank Tucker Alexander, which tracks M&A activity for Catalog Age.

What’s more, “we’ve yet to see a tier-one property being auctioned off like we did in the ’90s,” Battle says, referring to a deal on the caliber of private equity investor Cortec Group’s 2002 acquisition of Dr. Leonard’s Healthcare Group. The multititle cataloger sold for a reported $240 million, or about nine times earnings before income, taxes, depreciation, and amortization (EBITDA).

While there are always opportunistic buyers looking to acquire underperforming titles and integrate them into a mature business, Battle believes that many multichannel merchants are waiting for another significant sale to take place before they determine that it’s save to come out of their caves and join the action.

Collegiate Pacific buys Orlando Team Sports

When: November The facts: In acquiring what it says is the largest team dealer in Florida, Dallas-based Collegiate Pacific is strengthening its own team. Like other recent Collegiate Pacific acquisitions, including Kessler’s and Dixie Sporting Goods, Orlando Team Sports sells uniforms and accessories; in contrast, Collegiate Pacific’s bread-and-butter has been supplying equipment to school and institutions. Collegiate Pacific in December developed a 200-page catalog for Orlando Team Sports, according to president Adam Blumenfeld, The catalog was not mailed, however, but distributed by the company’s 140-person sales force. The skinny: The deal came just three days after Collegiate Pacific announced a $40 million round of financing that the company will use to acquire more businesses.

Airgas picks up a pair

When: December The facts: Airgas, a Radnor, PA-based distributor of industrial, medical, and welding gasses, continued on its promise to grow revenue through acquisitions. In December it acquired two welding operators — Portland, OR-based Watt Welding Supply and Sacramento, CA-based DC Welding — to help bolster its regional businesses. Watt Welding will be integrated within the parent company’s Portland, OR-based Airgas Nor Pac subsidiary, which has 45 locations in Oregon, Washington, Alaska, and northern Idaho. Meanwhile, Airgas will fold DC Welding into Airgas Northern California and Nevada, which has 42 locations in the region. The skinny: The two acquisitions were among 11 that Airgas has completed since its fiscal year began in April; in total the deals have added $260 million in revenue to the company.

Equity firm gets cooking with Chef’s Catalog

When: November The facts: San Francisco-based private equity firm JH Partners acquired $75 million Chef’s Catalog from Dallas-based Neiman Marcus Group. The high-end merchant put the kitchenware title up for sale in May 2004. In the five years that Neiman Marcus owned Chef’s Catalog, the kitchenware market has become increasingly competitive. What’s more, Chef’s Catalog’s margins were lower than those of Neiman’s other titles, which include high-end home decor catalog Horchow. In recent years Chef’s Catalog tried to introduce more private-label and tabletop items and giftware, but customers did not respond well to the offerings. Jon Medved, former CEO of gifts and housewares mailer Walter Drake, is now the CEO of Pikes Peak Direct Marketing, the corporation formed by JH Partners for the transaction. Medved expects to complete Chef’s Catalog’s move from Dallas to Colorado Springs, CO, this month. The skinny: Once the move and integration of the acquisition are complete, the new owner will set its sights on expanding Chef’s Catalog’s retail base beyond its two Chicago-area stores.

4Q 2004 CATALOG INDUSTRY TRANSACTIONS

Company Market segment Buyer/investor Investment form Est. price (in millions)
OCT. Whatever Works Garden, home improvement Potpourri Group Acq. of assets N/A
NOV. Chef’s Catalog Cooking equipment JH Partners Acq. of assets N/A
The Winetasting Network Wine 1-800-Flowers.com Acq. of assets N/A
Alsto Garden, home improvement HSN Improvements Acq. of assets N/A
Boise Cascade Corp. Office products Boise Cascade LLC Acq. of assets $3.700.0
Barton-Cyker Dental Supply Dental supplies Henry Schein Acq. of assets N/A
Orlando Team Sports Team sporting goods Collegiate Pacific Acq. of assets N/A
DEC. Concepts Direct Gifts Direct Retailing Acq. of assets N/A
Old Glory Rock ‘n’ roll merchandise Glenn Morelli Acq. of assets N/A
DC Welding Industrial supplies Airgas Acq. of assets N/A
Watt Welding Supply Industrial supplies Airgas Acq. of assets N/A
Source: Tucker Alexander compiled from public information and other nonconfidential sources