Let’s Not Make a Deal

Those looking for 2003 to end with a flurry of deals were disappointed. As was the case with the fourth quarter in 2002, the fourth quarter of 2003 failed to unite large numbers of sellers with buyers. “The deal market fizzled out,” says Craig Battle, managing director of Princeton, NJ-based Tucker Alexander, which tracks industry mergers and acquisitions for Catalog Age.

In all, 16 industry deals occurred during the fourth quarter, flat with the previous fourth quarter and down from the comparable periods of 2001 and 2000.

“If you look at the previous three quarters, as pathetic as they were, the fourth quarter was even more pathetic,” Battle says. Rather than spending their energies wheeling and dealing, Battle reasons that “catalogers focused on their core businesses to see if they could finish the year on a positive note.”

CATALOG AGE’S SPOTLIGHT ON FOURTH-QUARTER DEALS

Riverside Revs Up Its Holdings

When: October

The facts: Private equity player The Riverside Co. continued its roll-up strategy of acquiring catalogers in the automotive accessories market with its purchase of Stylin’ Concepts. Cleveland-based Stylin’ Concepts, which mails six catalogs, operates a pair of Websites, and owns one store, will be part of Riverside’s auto specialty accessories and parts group. The division includes cataloger J.C. Whitney & Co., which Riverside acquired in June 2002. According to Riverside, Stylin’ Concepts has grown 332% since 1999 under the ownership of John Milos, who will remain president.

The skinny: Stylin’ Concepts is on a roll: Riverside marked the company’s ninth acquisition last year.

Tabacalera Makes a Smoking Deal

When: October

The facts: Madrid-based Altadis, through its Tabacalera Cigars Internacional unit, bought a majority stake in Burlington, NC-based distributor JR Cigar. The $62 million JR Cigar includes print and online catalogs as well three North Carolina retail stores. The purchase provides Tabacalera a solid foothold in the U.S. Altadis also acquired the option to buy the remaining shares in JR Cigar that it does not already own during the next five years. JR Cigar founder Lewis Rothman will remain chairman/CEO.

The skinny: Tabacalera not only transforms a competitor into a possible distributor, but it also gains a company that is, according to Battle, “hugely profitable.”

Collegiate Pacific Makes Play for Tomark

When: November

The facts: Dallas-based Collegiate Pacific, a manufacturer/marketer of sporting equipment for schools and teams, purchased another manufacturer/ marketer, Corona, CA-based Tomark. Collegiate wasted little time in leveraging its acquisition: It already displays some of its 3,200 products in Tomark’s two main catalogs: one selling baseball and softball products, the other devoted to basketball, volleyball, and gymnasium gear.

The skinny: Thanks to Tomark, Collegiate Pacific expects revenue for the first quarter of 2004 to hit a record $10 million, up about 50% from last year.

Acquisition Lights Up Interline Brands

When: November

The facts: By scooping up Pompano Beach, FL-based Florida Lighting, the $638 million Interline Brands expands its presence in the specialty lighting and electrical products category. Florida Lighting mails three catalogs: SunStar, which sells electrical components to contractors; AF Lighting, which sells decorative lighting fixtures to retailers; and Allfit, which sells lighting components to showrooms and distributors. Jacksonville, FL-based Interline Brands’ other catalogs are Barnet, Wilmar, J.A. Sexauer, Maintenance USA, Hardware Express, Trayco, and Leran.

The skinny: Florida Lighting marks the first acquisition for Interline Brands since the company was created when Wilmar merged with Barnet in July 2000.

Chicago Is Henry Schein’s Kinda Town

When: November

The facts: Melville, NY-based medical, dental, and veterinary supplies giant Henry Schein expanded its specialty pharmaceuticals business by purchasing Damer & Cartwright Pharmaceutical and American Medical Services, both of which are located in Chicago. Damer & Cartwright is a distributor of drugs for oncology, infertility, hepatitis, organ transplants, and respiratory disease. American Medical Services distributes pharmaceuticals and other healthcare supplies primarily to oncologists.

The skinny: The acquired companies posted combined revenue of more than $100 million for the past 12 months.

RR Donnelley a Cataloger?

When: November

The facts: Chicago-based printer RR Donnelley agreed to buy Toronto-based business forms printing conglomerate Moore Wallace for $2.8 billion in stock. The acquisition broadens the 140-year-old Donnelley’s capabilities beyond printing and package distribution. It also will make Donnelley a cataloger: Moore Wallace’s divisions include Brea, CA-based business labels catalog Veriad/UAL (formerly known as United Ad Label). Veriad mails five 36-page catalogs — covering the healthcare, media, physician practice, veterinary, and quality systems markets — in the fall and spring.

The skinny: The combined company is expected to bring in $8 billion in revenue and save about $100 million in costs in the first 12-24 months through what Donnelley calls “procurement savings, asset rationalization and the elimination of overhead.”

FOURTH-QUARTER 2003 CATALOG INDUSTRY TRANSACTIONS

Company Market segment Buyer/investor Investment form Est. price (in millions)
OCTOBER Stylin’ Concepts Automobile acccessories The Riverside Co. Acq. of assets N/A
JR Cigar Tobacco products Tabacalera Cigars Internacional Majority investment N/A
MindWare Toys Martin Smith Majority investment N/A
FTD Floral services and products Green Equity Investors IV Merger $420.0
NOVEMBER International Vision Direct Corp. Contact lenses Drugstore.com Acq. of assets $10.0
Hanover Direct Apparel and home goods Chelsey Direct Recapitalization N/A
Tomark Sports equipment Collegiate Pacific Acq. of assets N/A
Damer & Cartwright Pharmaceutical Pharmaceuticals Henry Schein Acq. of assets N/A
American Medical Services Pharmaceuticals Henry Schein Acq. of assets N/A
Athletic Training Equipment Co. Sports equipment AMER Sports Co. Acq. of assets $10.5
Moore Wallace/Veriad UAL Labels RR Donnelly Stock purchase $2,800.0
Florida Lighting Lighting and electrical products Interline Brands Acq. of assets N/A
All-In-One Signage SKM Growth Investors Equity investment N/A
DECEMBER Edwin Watts Golf Golf equipment Wellspring Capital Management Acq. of assets N/A
Petals Home decor Petals Decorative Accents Corp. Acq. of assets N/A
Economy Maintenance Supply Co. MRO supplies Home Depot Acq. of assets N/A
Source: Tucker Alexander, compiled from public information and other nonconfidential sources

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