The first quarter of 2001 was a hotbed of catalog industry mergers and acquisitions. Thirty-seven transactions were completed during the first three months of the year, compared to just eight during the first quarter of 2000.
Despite the number of deals during the quarter, the overall M&A market is weak, says Craig Battle, founder of Princeton, NJ-based investment bank Tucker Alexander. Deal makers are wary of the volatile stock market and wavering consumer confidence — not to mention the low price-to-earnings numbers for the publicly traded catalogers. According to Battle, current company valuations are about four to six times earnings before interest, taxes, depreciation, and amortization (EBITDA). Three or four years ago, valuations garnered multiples of six to 10 times EBITDA.
“There were a significant number of transactions that began in the fourth quarter [of 2000] that died in the first quarter [of 2001],” Battle says. “The only deals completed in the first quarter were the smaller deals that basically had to get done because they were beginning to drag on the main business.” One such example, he says, was New York-based Delia’s shedding of its TSI Soccer catalog. The teen girls’ apparel marketer decided to focus on its core markets, so unloading the boys’ TSI Soccer business made sense, even if it didn’t get as much for the title as it might have a year ago.
A number of the first-quarter deals also involved now-defunct Web businesses, such as the sale of Garden.com’s assets to Burpee and the sale of MVP.com’s assets to Sportsline. Many of these dead dot-coms were swallowed up on the cheap. “Buyers may have seen some attractive pieces of the business, such as a dot-com’s URL or customer list,” Battle notes.
CATALOG AGE’S DEALS OF THE QUARTER:
Lab Safety Supply Buys Ben Meadows
Date announced: Feb. 26
What it means: Janesville, WI-based safety, maintenance, and materials-handling products cataloger Lab Safety Supply, part of $5 billion W.W. Grainger, bought $20 million forestry products marketer Ben Meadows largely for its customer file. Acquiring Canton, GA-based Ben Meadows will provide Lab Safety with a foothold in the $500 million forestry industry. “The integration of Ben Meadows provides us with a leading position in the environmental and forestry markets, which in turn provides new growth opportunities for us,” says Lab Safety president Larry Loizzo.
The skinny: The Ben Meadows acquisition allows Lab Safety to leverage economies of scale while growing Meadows’ catalog circulation.
Bankrupt Garden Botanika Bought by Schroeder & Tremayne
Date announced: March 1
What it means: St. Louis-based bath and body products supplier (and Garden Botanika creditor) Schroeder & Tremayne purchased the assets of the Redmond, WA-based cosmetics and personal-care products cataloger/retailer, which had been in Chapter 11 since April 1999. For the nine months ended Oct. 28, 2000, Garden Botanika posted a net loss of $7.6 million on sales of $30.8 million.
The skinny: Will Schroeder & Tremayne make changes to the catalog? Will it even continue to produce a catalog? Garden Botanika last mailed a book in December and a direct mail piece in January.
CEXP Buys USOP’s North American Assets
Date announced: March 5
What it means: Broomfield, CO-based office and computer products marketer Corporate Express (CEXP) acquired the North American assets of Washington-based U.S. Office Products (USOP) for $250 million, as part of the latter’s Chapter 11 reorganization. The deal gives CEXP, which targets larger companies, a foothold among small and midsize companies.
The skinny: CEXP does about $4 billion in annual U.S. sales and will gain another $1 billion from the transaction. Both companies are heavily into e-commerce: USOP reaps about $100 million in online sales, while CEXP brings in about $600 million via the Web.
| Company | Market segment | Buyer/investor | Investment form | Est. price (in millions) |
|
|---|---|---|---|---|---|
| JANUARY | Netcabling | Telecommunications | Black Box Corp | Acq. of assets | N/A |
| Bernhard Merz | Telecommunications | Black Box Corp. | Acq. of assets | N/A | |
| Colorado Pen Co. | Writing instruments | Strategic Marketing | Acq. of assets | N/A | |
| Edmund Scientific | Optical and medical equipment | Science Kit & Boreal Laboratories | Acq. of assets | N/A | |
| The J. Peterman Co. | Apparel and accessories | J. Peterman | Acq. of assets | N/A | |
| Afibel | Apparel and accessories | Quelle | Majority stake | $52.0 | |
| Guild.com | Luxury goods | Ashford.com | Stock purchase | $5.5 | |
| Garden.com | Gardening | Burpee Holding Co.; Walmart.com | Acq. of assets | $4.4 | |
| Sparknotes.com | Academic resources | Barnes & Noble | Acq. of assets | N/A | |
| Craftopia | Craft supplies | Home Shopping Network | Acq. of assets | N/A | |
| Girl Press | Teen publishing | Alloy Online | Acq. of assets | N/A | |
| FEBRUARY | Universal Connections | Telecommunications | Black Box Corp. | Acq. of assets | N/A |
| Equipmart | Sport equipment | Collegiate Pacific | Acq. of assets | N/A | |
| Ben Meadows Co. | Forestry equipment | Lab Safety Supply | Acq. of assets | N/A | |
| TSI Soccer | Sport equipment and apparel | Sports Endeavors | Acq. of assets | N/A | |
| The Female Athlete | Women’s athletic gear | TFA Acquisition | Acq. of assets | N/A | |
| Calyx & Corolla | Fresh flowers | Equity Resource Partners | Acq. of assets | $20.0 | |
| Paula Young (U.K. assets) | Wigs | Daxbourne International | Acq. of assets | N/A | |
| TechnoBrands | Consumer electronics | Winston Partners; Sterling Capital | Equity investment | $7.1 | |
| International Collector’s Society | Memorabilia | TechnoBrands | Acq. of assets | N/A | |
| Buy.com UK | Computer and electronics | John Lewis | Acq. of assets | N/A | |
| Greenlight.com | Automotive buying service | CarsDirect.com | Merger | N/A | |
| Women.com | Women’s interest | iVillage.com | Acq. of assets | $27.0 | |
| MVP.com | Sports products | Sportsline.com | Acq. of assets | N/A | |
| Egreetings Network | Media greetings | AmericanGreetings.com | Stock purchase | $28.0 | |
| MARCH | Michael Electronic | Telecommunications | Black Box Corp. | Acq. of assets | N/A |
| US Office Products Co. | Office products | Corporate Express | Acq. of assets | $250.0 | |
| Harbor Ridge Communications | Marketing services | eSafetyWorld | Minority Stake | N/A | |
| Curtis Rand Industries | Promotional products | Executive Greetings | Acq. of assets | N/A | |
| ReadyMade, Turnkey, TimeWise | Office products | Executive Greetings | Acq. of assets | N/A | |
| Mxgonline.com, ItsyBits.com, Beauty Jungle | Fashion and beauty | FashionMall.com | Acq. of assets | N/A | |
| Babycenter | Parenting resource | Johnson & Johnson | Acq. of assets | $10.0 | |
| The Wedding List | Wedding retailer | Martha Stewart Living | Acq. of assets | N/A | |
| Earlychildhood | Educational toys | SmarterKids.com | Merger | N/A | |
| Garden Botanika | Personal care | Schroeder & Tremayne | Acq. of assets | $1.3 | |
| American Music Group | Musical instruments | Guitar Center | Acq. of assets | $16.9 | |
| In the Company of Dogs | Gifts | Potpourri Holdings | Acq. of assets | N/A |