Oriental Trading sold

Jul 01, 2006 9:30 PM  By

Washington-based private equity firm The Carlyle Group has agreed to buy the majority of the Omaha, NE-based gifts and novelties cataloger Oriental Trading Co. from Los Angeles-based Brentwood Associates. Terms of the transaction, which is scheduled to close in the third quarter, were not released. Brentwood will retain a “significant” minority stake — reported by Reuters to be 25% — in the company, which it purchased in 2000.

Oriental Trading CEO Steve Frary is excited about the deal: “Carlyle is a great firm,” he says. “They are one of the largest private equity firms; they have a global presence and a lot of resources.”

Carlyle hasn’t indicated that there would be any changes to the business, Frary says. “We will continue to run the business the way it has been run… They’re big fans of the company and supportive of what we do and what we’ve done.”

So are many observers. “We think it’s a great business,” says Michael Grant, managing director for New York-based strategic consulting firm Winterberry Group, which provided business diligence advice to Carlyle for the transaction. “Part of what we saw was a free cash flow that is very attractive to the private equity community. It’s a very strong brand with 40 years of successful merchandising innovations. And for any cataloger or multichannel marketer, that’s one of the linchpins of success.”

Founded in 1932 by Harry Watanabe, Oriental Trading sells party supplies, novelties, toys, and arts and crafts supplies to consumers and businesses. The company has more than 18 million customers on file, mails 300 million catalogs annually, operates three Websites, and offers more than 25,000 SKUs. In addition to the flagship catalog, the company mails Hands on Fun, which caters to teachers; Terry’s Village, which sells gifts and home accents; Sensational Crafts; and Inspirations, which sells religious-themed items.

Oriental Trading is the first cataloger bought by Carlyle, notes Stuart Rose, managing director of Wellesley, MA-based investment bank Tully & Holland. He adds that Carlyle is a well-known private equity group that works in a number of industries. In March, along with Bain Capital and Thomas H. Lee, two of Boston’s largest buyout companies, Carlyle bought Dunkin’ Brands — which includes Baskin-Robbins ice cream and Togo’s sandwich shops as well as Dunkin’ Donuts — for $2.43 billion.

“The [Oriental Trading] deal shows that the industry continues to be attractive to private equity groups,” Rose says. “While this is being sold from one private equity group to another, it demonstrates the desirability of catalogers.”