Waiting for the activity to heat up

Jun 01, 2006 9:30 PM  By

Anemic” is one word to describe industry mergers and acquisitions activity during the first quarter, says Craig Battle, managing director of Princeton, NJ-based investment bank Tucker Alexander, which tracks transactions for Multichannel Merchant. But it’s no more or less anemic than the first quarter of 2005 had been. Eleven deals took place during the first three months of this year, the same as were conducted during the first quarter of last year.

But Battle says that this year’s first-quarter deals were more targeted and strategic. Think women’s apparel merchant Chico’s January acquisition of fellow apparel cataloger/retailer Fitiques, or the purchase of Rand Materials Handling Equipment by W.W. Grainger division Lab Safety Supply the following month. “Most of the activity we’ve seen over the past 24 months has involved big deals, and there hasn’t been the volume of small to midsize deals we’ve seen in the past,” Battle says.

One reason deal activity is relatively subdued during the first quarter, Battle says, is that many companies are still finalizing their numbers from the previous year. Then again, that didn’t stop Home Depot from paying nearly $3.5 billion for construction supplies distribution Hughes Supply in January, or apparel cataloger/retailer The Talbots from agreeing to buy women’s apparel merchant J. Jill Group for $517 million in February, or San Francisco-based private equity firm Golden Gate Capital from buying multititle mailer Norm Thompson Outfitters in March.

In fact, Battle thinks we’ll be seeing more activity on the part of Golden Gate. “They’re continuing to roll up everything they can find in the apparel industry,” Battle says.

Chico’s now wears Fitigues

When: January The facts: Women’s apparel merchant Chico’s FAS acquired most of the assets of fellow apparel merchant Fitigues. Fort Myers, FL-based Chico’s bought 12 of Scottsdale, AZ-based Fitigues’ 14 stores, as well as its catalog and online businesses, for an undisclosed amount. Chico’s spokesperson F. Michael Smith said in a statement that the $1.07 billion company sees demographic similarities between Fitigues and its White House/Black Market retail chain, which Chico’s acquired in 2003. The skinny: Smith says Chico’s didn’t buy the other two Fitigues stores because their leases ran out and the stores were closed.

Golf Galaxy captures The GolfWorks

When: March The facts: Eden Prairie, MN-based Golf Galaxy will pay approximately $4 million in cash and 150,000 shares of stock to acquire rival cataloger/retailer The GolfWorks. Newark, OH-based GolfWorks will operate as a wholly owned subsidiary of Golf Galaxy. In addition to its domestic operations — which include a catalog, a Website, an assembly and distribution center, and a customer contact center — GolfWorks has an operating division in Ontario. It sells both proprietary components and brand-name shafts and grips. Golf Galaxy, which sells golf equipment, components, and accessories, operates 49 stores in 23 states and a Website. Golf Galaxy plans to feature a GolfWorks “store in a store” in 29 of its stores by the summer and in all its stores by the fall. The skinny: The GolfWorks had fiscal 2005 net sales of $24.5 million. A decade ago, however, its net sales were $30 million.

Oh, Henry: Schein buys NLS Animal Health

When: March The facts: Melville, NY-based medical, dental, and veterinary supplies firm Henry Schein acquired NLS Animal Health, a privately held, full-service veterinary distribution business based in Owings Mills, MD. The NLS Animal Health serves approximately 8,000 vet clinics in 26 East Coast and Southern states and had 2005 sales of about $110 million. More than 60 sales representatives will be added to the $4.6 billion Henry Schein’s existing veterinary sales force as a result of the acquisition. The skinny: “Henry Schein is just an acquisition machine,” says Battle. The company already serves approximately 70% of the estimated 26,000 veterinary clinics in the U.S.

1Q 2006 CATALOG INDUSTRY TRANSACTIONS
Company Market segment Buyer/investor Investment form Est. price (in millions)
JAN. Late Great Chevy Auto parts and accessories Harbour Group Industries Acq. of assets N/A
Fitigues Apparel Chico’s FAS Acq. of assets N/A
Guild.com Gifts, jewelry, artwork Dolphine Equity Partners Investment $7.0
Hughes Supply Construction materials Home Depot Acq. of assets $3,470.0
FEB. J. Jill Group Women’s apparel The Talbots Acq. of assets $517.0
Shoebuy.com Footwear IAC/InterActive Corp. Acq. of assets N/A
Shopbop.com Women’s apparel Amazon.com Acq. of assets N/A
Rand Materials Handling Equipment Industrial storage and safety equipment Lab Safety Supply/W.W. Grainger Acq. of assets $16.0
MAR. Norm Thompson Outfitters Apparel, home decor, gifts Golden Gate Capital Acq. of assets N/A
The GolfWorks Golf equipment Golf Galaxy Acq. of assets $9.5
NLS Animal Health Veterinary supplies Henry Schein Acq. of assets N/A
Source: Tucker Alexander, compiled from public information and other nonconfidential sources