In the second quarter, 31 catalog-related deals went down, compared to just 11 in the second quarter of 2000.
On the surface, the sheer number of catalog-related mergers and acquisitions orchestrated in the second quarter — 31 — indicates that the industry is abuzz with activity. After all, during the second quarter of 2000, only 11 deals were transacted. So valuations must be rising and the industry growing stronger, right?
Not so fast, says Craig Battle, managing director at Princeton, NJ-based investment bank Tucker Alexander. Many of the deals completed this past quarter “needed to get done,” even though valuations for catalog companies remain low. A few examples: Hanover’s sale of its Improvements catalog; Delia’s divestiture of Storybook Heirlooms, Just for Kids, and Gurl.com.
One benefit of the low value placed on catalogs, though, is that private equity money is filtering into the industry. Examples include Dorset Capital’s investment in children’s apparel cataloger/retailer Hanna Andersson and home decor cataloger French Country Living.
Before the mid-1990s, according to Battle, few equity firms were interested in catalogs. “What brought them in then were low valuations, and I think you’re seeing the same thing going on today.”
CATALOG AGE’S DEALS OF THE QUARTER
Storybook Ending for Storybook Heirlooms
When announced: April
What it means: Teen girls’ apparel cataloger/retailer Delia’s sold the assets of Foster City, CA-based children’s apparel catalogs Storybook Heirlooms and Just for Kids to Kirkland, WA-based CelebrateExpress.com, which owns the Birthday Express and Celebrate Express party supplies catalogs. Jan Jewell, CelebrateExpress.com’s founder/co-CEO, says that Storybook Heirlooms’ target market — parents ages 35-44 — is the same as that of Birthday Express. Storybook and Just for Kids will be fulfilled out of Birthday Express’s Greensboro, NC, facilities; Storybook will be relocating to Birthday Express’s Kirkland headquarters.
The skinny: This deal, and the May divestiture of online community Gurl.com, completes the divestiture of New York-based Delia’s noncore properties. In February, Delia’s sold the assets of TSI Soccer to Hillsborough, NC-based Sports Endeavors.
HSN Makes Room for Improvements
When announced: June
What it means: As part of its continuing restructuring to focus on core home decor titles The Company Store and Domestications, Hanover Direct sold its Improvements home and garden products catalog to home shopping television network HSN for $33.4 million. Hanover’s Keystone subsidiary will provide fulfillment services for Improvements under a three-year deal.
The skinny: Some industry observers were surprised at the relatively high price that Hanover fetched for Improvements. “Obviously, to get that price, Improvements must have been doing very well,” Battle says.
Dorset Capital Buys Into Hanna Andersson and French Country Living
When announced: April; June
What it means: Two-year-old San Francisco- and Boston-based private equity fund Dorset Capital invested in children’s apparel marketer Hanna Andersson in April and home furnishings mailer French Country Living in June. Dorset general partner Don Steiner says the company saw an opportunity to grow Hanna Andersson by increasing catalog circulation and possibly opening more stores. French Country Living will use the money to increase catalog page counts and boost circulation, as well as develop its Website.
The skinny: Dorset made its first direct marketing investment last year, in online auction site Smart Bargains. Dorset’s hiring of Steiner, a former Cornerstone Brands executive, could lead to more catalog investments.
Norm Thompson Buys Waterfront Property
When announced: April
What it means: Hillsboro, OR-based gifts and apparel cataloger Norm Thompson Outfitters has bought $3 million Lake Oswego, OR-based gifts mailer Waterfront Living. Terms were not disclosed, but Waterfront Living founder Mark Roberts will continue running the catalog. Norm Thompson has provided fulfillment services for Waterfront Living for nearly two years, so “we already had the back-end systems in place,” says Craig Dewey, senior vice president of catalogs for Norm Thompson. “Now we have to do some branding on the front end.”
The skinny: Dealmaking is all about who you know and, in this case, where you live: Waterfront Living president Roberts is a neighbor of Norm Thompson president Rebecca Jewett.
|Company||Market segment||Buyer/investor||Investment form||Est. price
|APRIL||Carnegie Communications||Academic resources||Alloy Online||Stock purchase||$25.00|
|Durham & Co.||Personalized products||Awards.com||Stock purchase||N/A|
|Hanna Andersson||Children’s apparel||Dorset Capital||Acq. of assets||N/A|
|Waterfront Living||Gifts||Norm Thompson Outfitters||Acq. of assets||N/A|
|Storybook Heirlooms/Just for Kids||Children’s apparel||CelebrationExpress.com||Acq. of assets||N/A|
|Wall Street Creations||Gifts||Nite Lite Products Co.||Acq. of assets||$0.35|
|Haddad Electronic Supply||Telecommunications||Black Box Corp.||Acq. of assets||N/A|
|Integrated Cabling Systems||Telecommunications||Black Box Corp.||Acq. of assets||N/A|
|MAY||NatureSmart||Nutritional supplements||NBTY||Acq. of assets||$28.00|
|SkyMall||Gifts and accessories||Gemstar||Acq. of assets||$47.50|
|Smith & Wesson||Guns||Saf-T-Hammer||Acq. of assets||$15.00|
|Specialty Catalog||Consumer products||Specialty Acquisition Corp.||Merger||$12.20|
|Cyberian Outpost||Consumer electronics||PC Connection||Stock purchase||N/A|
|Sport Supply Group||Sporting goods||Emerson Radio Corp.||Majority stake||N/A|
|Everything Wireless||Consumer electronics||800.com||Acq. of assets||N/A|
|Gurl.com||Internet community||Primedia||Acq. of assets||N/A|
|eToys||Toys||KB Toys||Acq. of assets||$5.40|
|National Boston Medical||Health and fitness||Infotopia||Acq. of assets||N/A|
|Roxy.com||Consumer electronics||800.com||Acq. of assets||N/A|
|Wine.com||Food and beverages||eVineyard||Acq. of assets||N/A|
|JUNE||Foster & Gallagher Children’s Group||Children’s products||1-800-Flowers.com||Acq. of assets||$4.70|
|French Country Living||Home furnishings||Dorset Capital||Acq. of assets||N/A|
|Improvements||Home and garden products||HSN||Acq. of assets||$33.40|
|Miles Kimball Co.||Gifts||Sun Capital Partners||Equity investment||N/A|
|PetQuarters||Pet supplies||Zcapital||Equity investment||$2.50|
|Vivid Communications||Telecommunications||Black Box Corp.||Acq. of assets||N/A|
|DesigNet||Telecommunications||Black Box Corp.||Acq. of assets||N/A|
|MicronPC||Computers||Gores Technologies Group||Acq. of assets||N/A|
|Officesupplies.com||Office products||Office Depot||Acq. of assets||N/A|
|Officefurniture.com||Office products||National Business Furniture||Acq. of assets||N/A|
|Williams Software||Internet technology||Gourmetmarket.com||Stock purchase||N/A|
|Source: Tucker Alexander, compiled from public information and other nonconfidential sources|