Dealmakers rev up again

Second-quarter merger and acquisition activity was up 36% from this time last year and up 76% from the first quarter of ’98. Catalogers completed 30 transactions during April, May, and June, compared to only 17 in the first quarter.

Of the deals completed during the second quarter, $1.8 billion toy manufacturer Mattel’s purchase of Pleasant Co. and $6 billion Office Depot’s acquisition of Viking Office Products grabbed most of the headlines. Acquiring the nearly $300 million doll and books cataloger gives Mattel instant direct marketing expertise and yet another distribution channel. In addition to continuing the Pleasant Co. catalog, Mattel plans to market Pleasant Co.’s American Girl merchandise worldwide through its global network.

While Mattel will introduce Pleasant Co. to an international audience, $1.38 billion Viking Office Products will do the same for its new parent, office supplies retailer Office Depot. Viking operates in the U.K., France, Germany, Belgium, the Netherlands, Luxemburg, and Australia; international business accounts for nearly two-thirds of its sales.

But Viking brings more to Office Depot than entry into Europe. “Office Depot was able to get into the catalog business through Viking,” says Andrew Calimano, an analyst at New York-based investment bank Gruppo, Levey, and Co. “What Viking brings are back-end fulfillment capabilities essential for Internet offerings.”

These headline-grabbing deals aren’t the only catalog transactions to play out on the international field. Medical, dental, and veterinary supplies cataloger Henry Schein bought $32 million Canadian dental distributor Arcona Health and acquired a majority interest in $16 million Australian health products marketer Regional Health Care Group. Closer to home, the $1.52 billion Schein bought $29 million Mobile, AL-based medical equipment distributor Bedsole Medical Cos. “These acquisitions will expand our reach in key territories, such as Canada, Australia, New Zealand, and the southern United States,” says Steven Paladino, senior vice president/chief financial officer for Melville, NY-based Schein.

While the big boys were wheeling and dealing to grow even bigger, Stamford, CT-based investor J.H. Whitney & Co. injected $2 million into children’s apparel cataloger Fulcrum Direct in hopes of keeping the $80 million mailer afloat. But the measure wasn’t enough to prevent Fulcrum from filing for bankruptcy in July (see “Fulcrum shuts its doors,” p. 7).

In bloom: 1-800-Flowers Of all the second-quarter deals, gifts marketer 1-800-Flowers’ purchase of a majority stake of $42 million home decor and gardening cataloger Plow & Hearth may be the sleeper of the bunch, Calimano says.

Most of 1-800-Flowers’ annual sales of $300 million comes from telemarketing and retail. “Plow & Hearth gives 1-800-Flowers entry into the gardening supplies industry and the print catalog business,” Calimano says. “And with its Internet presence, 1-800-Flowers has an opportunity to provide Plow & Hearth’s gardening supplies on its Website. It’s a tremendous opportunity for 1-800-Flowers to leverage the Plow & Hearth database.”

And Calimano predicts further activity from Westbury, NY-based 1-800-Flowers. “It may be exploring similar acquisitions of gardening catalogs down the road.”

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