The summer months came and went without much notable deal activity. Just 16 deals were orchestrated in the third quarter. That’s up from 13 in last year’s third quarter but down from 22 two years ago.
The vast majority of deals were strategic plays in which marketers strengthened their hand by scooping up a competing or complementary business. For instance, in August, art supplies cataloger/retailer Dick Blick Holdings, which also mails the Alsto’s home and gardening title, bought the $40 million Art Store retail chain out of bankruptcy for $11 million. The deal solidifies Chicago-based Dick Blick’s core business because the Art Store has stores where Dick Blick did not.
Other examples include $798.6 million Broder Bros.’ September acquisition of $131.8 million NES Clothing Corp., one of its rivals in the wholesale sportswear market.
Of the few acquisitions involving private equity firms, arguably the most noteworthy was the July sale of the controlling share of Salt Lake City, UT-based Sundance Catalog Co. to two private equity firms. Actor and Sundance founder Robert Redford and Sundance Catalog CEO Bruce Willard sold the roughly $70 million business for an estimated $20 million-$30 million to Boston-based Webster Capital and New York-based ACI Capital.
Craig Battle, managing director of Princeton, NJ-based investment bank Tucker Alexander, which tracks merger and acquisition activity for Catalog Age, doesn’t expect to see a surge in deal making until catalogers can show continued stability and returns. A strong fourth quarter, though, “may entice some companies that have been on the sidelines to get back into it come the new year,” he says.
CATALOG AGE SPOTLIGHT ON THIRD-QUARTER DEALS
Staples Goes Global
The facts: Framingham, MA-based cataloger/retailer Staples is going where it has never gone before: Middle Europe and Scandinavia. The acquisitions of Austria’s Pressel Versand International and the office products division of Denmark’s Malling Beck instantly give the $13.2 billion Staples a foothold in Denmark, the Netherlands, Austria, Switzerland, Poland, Hungary, and the Czech Republic, complementing the company’s existing operations in Germany, France, and Belgium.
The office supplies giant, which also owns cataloger Quill, hopes the deals will counter some of the overseas presence of major competitor Office Depot, whose Viking Office Products catalog operates in 22 countries.
Staples expects the two acquisitions to add annual profitable sales of approximately $32.2 million. According to spokesperson Owen Davis, Staples’ entire European business took in $1.6 billion in 2003, including revenue from its delivery and retail units.
The skinny: Perhaps borrowing a page from Richard Nixon’s playbook, the company has established relations with China — an estimated $25 billion market — by virtue of its August agreement with Shanghai-based OA365. (To read more on that deal, see “Mailers Mining the Massive Market of Asia,” page 12.)
Blyth Augments Home Decor and Garden Offerings
The facts: By acquiring two home-decor companies based in the Netherlands, Edelman and Euro-Décor, $1.29 billion Greenwich, CT-based Blyth rounds out its European wholesale category. The companies had combined net sales of $96.7 million in 2003.
Edelman sells indoor and outdoor planters, candle accessories, tabletop items, and a broad range of Christmas products, such as lighting, ornaments, and artificial trees. Euro-Décor sells decorative supplies for florists along with glass and ceramic vases, baskets, floral arrangements, table centerpieces, wall decorations, and plush animals. As a leading European decorative supplier, Euro-Décor designs and sources more than 10,000 products for more than 2,200 active customers.
Blyth, which owns gifts and housewares catalogers Miles Kimball Co. and Walter Drake, is primarily a manufacturer/wholesaler of home fragrances, home decor, seasonal decorations, and gifts. Its catalog division accounted for only 16% of total revenue last year, or $203.0 million.
The skinny: Don’t be surprised if Blyth lays low on the M&A front. “We’ve made a larger number of acquisitions in the last 18 months than we normally do,” says spokesperson Tyler Schuessler. “So we still have to integrate the businesses.”
New Outfit for Life Uniform
The facts: Private equity firm Sun Capital Partners and Healthcare Uniform Co., an affiliate formed for the transaction, purchased Life Uniform from St. Louis-based Angelica Corp. for $16 million, plus the assumption of $6 million in liabilities. Angelica had announced in February that it wanted to focus on its core linen-services business.
The acquisition includes 193 healthcare uniform and shoe stores, as well as Life Uniform’s catalog and e-commerce operations and inventory. According to the St. Louis Business Journal, 17 stores were not included in the sale and have been closed.
The skinny: Sun Capital is no stranger to catalogs. It had owned Oshkosh, WI-based Miles Kimball for 18 months before selling the title to Greenwich, CT-based Blyth in March 2003.
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|Company||Market segment||Buyer/investor||Investment form||Est. price (in millions)|
|JULY||The Golf Warehouse||Golf equipment||The Sportsman’s Guide||Acq. of assets||$30.0|
|The Sundance Catalog Co.||Apparel, decor, gifts||Webster Capital/ACI Capital||Majority investment||$20.0-$30.0|
|Life Uniform||Uniforms||Sun Capital Partners||Acq. of assets||$22.0|
|Dixie Sporting||Sporting goods||Collegiate Pacific||Acq. of assets||$6.0|
|InsideSportsfishing.com||Fishing supplies||Ritz Interactive||Acq. of assets||N/A|
|AUGUST||Smith & Hawken||Gardening accessories||The Scotts Co.||Acq. of assets||$72.0|
|The Art Store||Art supplies||Dick Blick Holdings||Acq. of assets||$11.0|
|Sure Fit||Slipcovers||D.E. Shaw Group||Acq. of assets||$20.5|
|Rochester Big & Tall||Apparel||Casual Male||Acq. of assets||$20.0|
|Malling Beck||Office products||Staples||Acq. of assets||N/A|
|Pressel Versand International||Office products||Staples||Acq. of assets||N/A|
|SEPTEMBER||Colorful Images||Stationery||Current USA||Acq. of assets||N/A|
|Edelman||Wholesale decor||Blyth||Acq. of assets||N/A|
|Euro-Décor||Wholesale gifts and decor||Blyth||Acq. of assets||N/A|
|NES Clothing Co.||Wholesale sportswear||Broder Bros.||Acq. of assets||N/A|
|Welding Supply House||Industrial supplies||Airgas||Acq. of assets||N/A|
|Source: Tucker Alexander, compiled from public information and other nonconfidential sources|