Despite the paltry number of deals in the first quarter — 13, compared with 18 last year — some observers are gearing up for a whirlwind of mergers and acquisitions.
“The good news is that last year is behind us,” says Craig Battle, managing director at Princeton, NJ-based investment bank Tucker Alexander, which tracks mergers and acquisitions for Catalog Age. “Although the war in Iraq put M&A activities on hold in the first quarter, I would be very surprised if the next six months don’t show a vast improvement in deal making.”
As anecdotal evidence, Battle points out that “financial groups have come into the industry and made direct contact with catalogers — many of which aren’t for sale — about the industry. They are coming in and spending real time educating themselves about the catalog industry.” He predicts that catalogers in the $100 million sales range will be the most likely targets of manufacturers and other companies outside of the industry.
Battle suggests that other catalogers that have bought rival or complementary mailers in the past, such as Cornerstone Group (whose titles include Ballard Designs and Frontgate), will also return to the M&A scene. “Some of our clients are starting to poke around,” Battle says.
| Company | Market segment | Buyer/investor | Investment form | Est. price (in millions) | |
|---|---|---|---|---|---|
| JAN. | BoatU.S. | Boating | West Marine | Acquisition of assets | $72.0 |
| Bronson Laboratories | Dietary supplements | Kabco Pharmaceuticals | Acquisition of assets | $8.0 | |
| IntelliHealth | Healthcare | Familymeds | Acquisition of assets | N/A | |
| FEB. | Successories | Promotional products | S.I. Acquisition | Acquisition of assets | N/A |
| Delia’s | Apparel | JLP Daisy LLC | Licensing | $16.5 | |
| WrestlingOne | Sports | Matrix Group Ltd. | Acquisition of assets | N/A | |
| VolleyballOne | Sports | Matrix Group Ltd. | Acquisition of assets | N/A | |
| Gempler’s | Horticultural/maintenance supplies | Grainger | Acquisition of assets | N/A | |
| MARCH | Miles Kimball Co. | Gifts and home decor | Blyth | Acquisition of assets | $65.0 |
| Chiasso | Gifts and home decor | CSS Capital | Acquisition of assets | $0.7 | |
| Sportsman’s Guide | Outdoor gear | Richard Scott | Minority investment | $2.0 | |
| Mark, Fore & Strike | Apparel | Larry Autrey MBO | Acquisition of assets | N/A | |
| Bluefly.com | Apparel | Soros Private Equity Partners | Majority investment | $5.0 | |
| Source: Tucker Alexander, compiled from public information and other nonconfidential sources | |||||
CATALOG AGE’S DEALS OF THE QUARTER
Miles Kimball Sold to Blyth
When: March
What it means: Eight months after parent company Sun Capital Partners announced its intent to sell Oshkosh, WI-based Miles Kimball, the cataloger of moderate-priced gifts and home decor on March 10 agreed to be sold to Greenwich, CT-based Blyth, a $1.29 billion manufacturer/marketer of candles, home fragrances, and gifts, for $65 million. Miles Kimball had been acquired by Boca Raton, FL-based Sun Capital Partners in June 2001. The cataloger, which mails about 55 million books annually, will remain in Oshkosh. Blyth, meanwhile plans to use the acquisition as its entry into the catalog business.
The skinny: According to Battle, the Blyth deal indicates that nontraditional acquirers are becoming interested in catalogers with scalable systems and fulfillment infrastructure.
Delia’s Inks Licensing Deal
When: February
What it means: Delia’s has found a clever way to raise some needed capital. In February, the New York-based cataloger/retailer of apparel for teen girls partnered with JLP Daisy, an affiliate of Schottenstein Stores Corp., to license the Delia’s brand on an exclusive basis for wholesale distribution of product, including apparel, home furnishings, cosmetics, and accessories.
Delia’s had previously hired brand management firm Group 3 Design to help it enter new channels of distribution. Group 3 will now manage these Delia’s-branded licensing activities. JLP Daisy has advanced Delia’s $16.5 million in cash against future royalties generated from the licensing venture. Once JLP Daisy recoups its advance plus a preferred return, Delia’s will receive a majority of the royalty stream after brand management fees.
The skinny: Evan Guillemin, Delia’s chief operating officer, sees an opportunity for department store chains, such as May Co. and Federated, to sell Delia’s-branded merchandise within their junior departments.
Bronson Labs Sold to Kabco Pharmaceuticals
When: January
What it means: Nutritional supplements manufacturer/marketer Twinlab Corp. sold its Bronson Laboratories catalog division for $8.0 million in cash. The transaction effectively ends Twinlab’s rocky run in the catalog business. The Hauppage, NY-based company had paid $56.1 million for Bronson in April 1998. The sale “is a continuation of what we’ve been doing for the past 18-24 months, which is selling off our noncore assets,” says Twinlab spokesperson Bill Rizzardi. Twinlab will use the proceeds of the sale to reduce borrowings outstanding under its revolving credit facility and will focus on selling supplements and vitamins to health-food stores.
As for the buyer, Amityville, NY-based Kabco Pharmaceuticals is a privately held vitamin and supplements marketer. The elusive company did not return repeated calls.
The skinny: When the deal was announced in January, Kabco requested anonymity. So what’s next for Bronson? Stay tuned.
West Marine Acquires BoatU.S.
When: January
What it means: Boating supplies cataloger/retailer West Marine purchased the catalog, retail, and wholesale units of BoatU.S. from the Boat Owners Association of the United States for $72 million in cash, including the assumption of some debt. West Marine expects to reap $140 million in additional annual revenue from the acquisition.
West Marine has 258 stores in the U.S. and Canada; BoatU.S. has 62 stores. The Boat Owners Association will continue to offer services to boat owners, such as towing, marine insurance, and boat financing. Under the terms of the deal, Watsonville, CA-based West Marine will promote membership in the association, while BoatU.S. will point its members to West Marine to buy supplies. West Marine plans to retain the BoatU.S. name on the stores. The company estimates that there is a 70% overlap of SKUs between the brands.
The skinny: It looks like the BoatU.S. acquisition is already paying dividends for West Marine. The $500 million-plus publicly traded cataloger/retailer cited the deal as the primary reason for its 14% first-quarter sales increase, to $111.1 million for the quarter ended March 29.
For the most up-to-date industry M&A news, updated every weekday, visit www.CatalogAgemag.com.