Third-Quarter Deals Drop Off Slightly

Twenty-two deals involving catalogers were completed this past third quarter, a 24% decline from the 29 transactions that closed during the third quarter of 2001. That some of the quarter’s biggest deals, such as Kennametal’s purchase of Widia Group and Staples’ acquisitions of Medical Arts Press and Guilbert, involved business catalogers is no surprise, according to Craig Battle, managing director of Princeton, NJ-based investment bank Tucker Alexander.

“The deal marketplace is healthier on the b-to-b side,” Battle says. Given the weak business climate and low multiples for many sellers, it’s a buyer’s market. And, Battle says, b-to-b marketers are more likely than their consumer counterparts to have the desire and the resources to make deals now.

“There are more examples of successful consolidation models in the business-to-business arena right now than there are with consumer titles,” Battle says, citing as examples Appleton, WI-based educational supplies cataloger School Specialty, Lawrence, PA-based networking products and services providers Black Box Corp., and Holliston, MA-based medical-research tools marketer/manufacturer Harvard Bioscience. Finding complementary businesses for consumer catalogs can be more difficult because most consumer titles are specialized businesses that sell to a narrow audience, Battle says. “Consumer consolidators executing a similar roll-up strategy haven’t proven it to be a winning formula.”


Two Deals in Two Months for Staples

When: July (Medical Arts Press), August (Guilbert)

What: In a case of a big fish getting even bigger, $10.74 billion Framingham, MA-based Staples paid $385 million for $168 million Medical Arts Press. In addition to the flagship catalog, which sells stationery for medical offices, Medical Arts includes SmileMakers, a cataloger of children’s novelties for doctors, dentists, and educators, and Hayes Marketing, which sells marketing-related products to chiropractors, dentists, and eyecare professionals. Nearly three-quarters of Brooklyn, MN-based Medical Arts’ products do not overlap with those sold in the Staples catalog and that of Staples’ Quill Corp. subsidiary.

Staples also bought the mail order unit of Guilbert, a Paris-based office supplies cataloger, from French conglomerate Pinault-Printemps-Redoute for more than $800 million. The deal gives Staples greater access into Europe, as Guilbert sells to small businesses in France, Spain, Italy, and Belgium. The only country outside of the U.S. in which Staples operates is the U.K. The $1.1 billion Quill catalog division sells only in the U.S.

The skinny: Staples’s combined annual catalog sales now increase to nearly $3 billion.

Cozy Deal for Comfort Corner

When: July

What: To focus on its wholesale division, manufacturer Lowell Shoe sold its Hudson, NH-based women’s shoe catalog, Comfort Corner. The buyer: the book’s former vice president/general manager, Robert Morrison, who started the catalog for Lowell Shoe 12 years ago. Terms of the deal were not disclosed.

Comfort Corner, which started out selling only Lowell Shoes, has since branched out to sell clothing and accessories as well. Under the new owner, the cataloger will continue selling Lowell Shoes and will also keep its circulation at 10 million books annually.

The skinny: Comfort Corner completed its move from Lowell Shoe’s headquarters in November to another facility in Hudson — within a half-mile of its main shoe supplier.

A Fine Feathered Acquisition for Drs. Foster & Smith

When: August

What: To beef up its line of bird merchandise, pet items cataloger Drs. Foster & Smith purchased assets of Rosemont, IL-based Hornbeck’s, a cataloger of bird food and cages. Terms of the deal were not disclosed. According to Rhinelander, WI-based Drs. Foster & Smith, Hornbeck’s was about to go out of business.

The skinny: The deal is expected to generate up to $2 million in revenue for Drs. Foster & Smith in 2003.

Fun and Games for Sally Distributors and S&S Worldwide

When: August

What: S&S Worldwide, which sells games, crafts, and activities to schools, rehabilitation centers, and other institutions, acquired substantially all the assets of Minneapolis-based toys and novelties marketer Sally Distributors. Colchester, CT-based S&S paid cash for Sally, though the price was not disclosed. The Sally acquisition enhances S&S’s product offering, says S&S vice president/general counsel Adam Schwartz, and also expands the company’s reach to restaurants and amusement centers.

The skinny: S&S plans to increase Sally’s circulation as well as fold its operations into S&S’s 300,000-sq.-ft. facility in Colchester.

Company Market segment Buyer/investor Investment form Est. price (in millions)
JULY Basse’s Choice Food Smithfield Foods Acq. of assets N/A
Comfort Corner Women’s shoes Management buyout Acq. of assets N/A
Fingerhut General merchandise FAC Acquisitions Acq. of assets N/A
Flowers Direct Floral services FTD Acq. of assets N/A
EDC Communications Telecommunications Black Box Corp. Acq. of assets N/A
Fingerhut Credit-card receivables CompuCredit Corp. Acq. of assets N/A
Genomic Solutions Laboratory equipment Harvard Bioscience Stock purchase $26.0
MPM Holdings College marketing Alloy Acq. of assets $48.0
Medical Arts Press Medical stationery Staples Acq. of assets $385.0
Societe d’Installation de Reseaux Telecommunications Black Box Corp. Acq. of assets N/A
Walden Precision Apparatus Laboratory equipment Harvard Bioscience Acq. of assets N/A Nutritional supplements Vitacost Acq. of assets $0.19
AUGUST Hornbeck’s Pet supplies Drs. Foster & Smith Acq. of assets N/A
The American School of Needlework Crafts Dynamic Resource Group Acq. of assets N/A
ABC School Supply Early-childhood products School Specialty Acq. of assets $43.0
Guilbert Office supplies Staples Acq. of assets $804.3
Saks Credit-card receivables Household International Acq. of assets $1,400.0
Sally Distributors Toys and novelties S&S Worldwide Acq. of assets N/A
Student Advantage Events and promotions Alloy Acq. of assets $6.5
Youthstream Media Networks College marketing Alloy Acq. of assets $7.0
SEPT. T. Shipley/Reliable HomeOffice Office furniture and exec. gifts Flax Art & Design Acq. of assets N/A
Widia Group Metalworking tools Kennametal Acq. of assets $184.7
Source: Tucker Alexander, compiled from public information and other nonconfidential sources