Mergers & Acquisitions: First-Quarter 2001

The first quarter of 2001 was a hotbed of catalog industry mergers and acquisitions. Thirty-seven transactions were completed during the first three months of the year, compared to just eight during the first quarter of 2000.

Despite the number of deals during the quarter, the overall M&A market is weak, says Craig Battle, founder of Princeton, NJ-based investment bank Tucker Alexander. Deal makers are wary of the volatile stock market and wavering consumer confidence — not to mention the low price-to-earnings numbers for the publicly traded catalogers. According to Battle, current company valuations are about four to six times earnings before interest, taxes, depreciation, and amortization (EBITDA). Three or four years ago, valuations garnered multiples of six to 10 times EBITDA.

“There were a significant number of transactions that began in the fourth quarter [of 2000] that died in the first quarter [of 2001],” Battle says. “The only deals completed in the first quarter were the smaller deals that basically had to get done because they were beginning to drag on the main business.” One such example, he says, was New York-based Delia’s shedding of its TSI Soccer catalog. The teen girls’ apparel marketer decided to focus on its core markets, so unloading the boys’ TSI Soccer business made sense, even if it didn’t get as much for the title as it might have a year ago.

A number of the first-quarter deals also involved now-defunct Web businesses, such as the sale of Garden.com’s assets to Burpee and the sale of MVP.com’s assets to Sportsline. Many of these dead dot-coms were swallowed up on the cheap. “Buyers may have seen some attractive pieces of the business, such as a dot-com’s URL or customer list,” Battle notes.

CATALOG AGE’S DEALS OF THE QUARTER:

Lab Safety Supply Buys Ben Meadows

Date announced: Feb. 26

What it means: Janesville, WI-based safety, maintenance, and materials-handling products cataloger Lab Safety Supply, part of $5 billion W.W. Grainger, bought $20 million forestry products marketer Ben Meadows largely for its customer file. Acquiring Canton, GA-based Ben Meadows will provide Lab Safety with a foothold in the $500 million forestry industry. “The integration of Ben Meadows provides us with a leading position in the environmental and forestry markets, which in turn provides new growth opportunities for us,” says Lab Safety president Larry Loizzo.

The skinny: The Ben Meadows acquisition allows Lab Safety to leverage economies of scale while growing Meadows’ catalog circulation.

Bankrupt Garden Botanika Bought by Schroeder & Tremayne

Date announced: March 1

What it means: St. Louis-based bath and body products supplier (and Garden Botanika creditor) Schroeder & Tremayne purchased the assets of the Redmond, WA-based cosmetics and personal-care products cataloger/retailer, which had been in Chapter 11 since April 1999. For the nine months ended Oct. 28, 2000, Garden Botanika posted a net loss of $7.6 million on sales of $30.8 million.

The skinny: Will Schroeder & Tremayne make changes to the catalog? Will it even continue to produce a catalog? Garden Botanika last mailed a book in December and a direct mail piece in January.

CEXP Buys USOP’s North American Assets

Date announced: March 5

What it means: Broomfield, CO-based office and computer products marketer Corporate Express (CEXP) acquired the North American assets of Washington-based U.S. Office Products (USOP) for $250 million, as part of the latter’s Chapter 11 reorganization. The deal gives CEXP, which targets larger companies, a foothold among small and midsize companies.

The skinny: CEXP does about $4 billion in annual U.S. sales and will gain another $1 billion from the transaction. Both companies are heavily into e-commerce: USOP reaps about $100 million in online sales, while CEXP brings in about $600 million via the Web.

FIRST-QUARTER 2001 CATALOG AND E-COMMERCE TRANSACTIONS
Company Market segment Buyer/investor Investment form Est. price
(in millions)
JANUARY Netcabling Telecommunications Black Box Corp Acq. of assets N/A
Bernhard Merz Telecommunications Black Box Corp. Acq. of assets N/A
Colorado Pen Co. Writing instruments Strategic Marketing Acq. of assets N/A
Edmund Scientific Optical and medical equipment Science Kit & Boreal Laboratories Acq. of assets N/A
The J. Peterman Co. Apparel and accessories J. Peterman Acq. of assets N/A
Afibel Apparel and accessories Quelle Majority stake $52.0
Guild.com Luxury goods Ashford.com Stock purchase $5.5
Garden.com Gardening Burpee Holding Co.; Walmart.com Acq. of assets $4.4
Sparknotes.com Academic resources Barnes & Noble Acq. of assets N/A
Craftopia Craft supplies Home Shopping Network Acq. of assets N/A
Girl Press Teen publishing Alloy Online Acq. of assets N/A
FEBRUARY Universal Connections Telecommunications Black Box Corp. Acq. of assets N/A
Equipmart Sport equipment Collegiate Pacific Acq. of assets N/A
Ben Meadows Co. Forestry equipment Lab Safety Supply Acq. of assets N/A
TSI Soccer Sport equipment and apparel Sports Endeavors Acq. of assets N/A
The Female Athlete Women’s athletic gear TFA Acquisition Acq. of assets N/A
Calyx & Corolla Fresh flowers Equity Resource Partners Acq. of assets $20.0
Paula Young (U.K. assets) Wigs Daxbourne International Acq. of assets N/A
TechnoBrands Consumer electronics Winston Partners; Sterling Capital Equity investment $7.1
International Collector’s Society Memorabilia TechnoBrands Acq. of assets N/A
Buy.com UK Computer and electronics John Lewis Acq. of assets N/A
Greenlight.com Automotive buying service CarsDirect.com Merger N/A
Women.com Women’s interest iVillage.com Acq. of assets $27.0
MVP.com Sports products Sportsline.com Acq. of assets N/A
Egreetings Network Media greetings AmericanGreetings.com Stock purchase $28.0
MARCH Michael Electronic Telecommunications Black Box Corp. Acq. of assets N/A
US Office Products Co. Office products Corporate Express Acq. of assets $250.0
Harbor Ridge Communications Marketing services eSafetyWorld Minority Stake N/A
Curtis Rand Industries Promotional products Executive Greetings Acq. of assets N/A
ReadyMade, Turnkey, TimeWise Office products Executive Greetings Acq. of assets N/A
Mxgonline.com, ItsyBits.com, Beauty Jungle Fashion and beauty FashionMall.com Acq. of assets N/A
Babycenter Parenting resource Johnson & Johnson Acq. of assets $10.0
The Wedding List Wedding retailer Martha Stewart Living Acq. of assets N/A
Earlychildhood Educational toys SmarterKids.com Merger N/A
Garden Botanika Personal care Schroeder & Tremayne Acq. of assets $1.3
American Music Group Musical instruments Guitar Center Acq. of assets $16.9
In the Company of Dogs Gifts Potpourri Holdings Acq. of assets N/A

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