Consumer sector comment – February 2011


Despite little positive news in the wider economy or the retail and consumer statistics, 2010 was a surprisingly good year for transactions. Prices were strong with many deals completed with valuations around double digit EBITDA multiples. This was partly a reflection of large amounts of private equity finance still targeting the consumer sector, as well as the return of trade buyers, all chasing a limited number of deal opportunities.

But high prices were also a reflection of the quality of the 2010 crop of businesses that managed to complete their transaction. Deals were closed where the market believed the asset to be of genuine merit – whether brand value, international opportunity, high online growth rates or a market leading position. Average businesses with more questions about short-term growth prospects struggled to get deals completed, particularly if price expectations or overly aggressive processes were out of line with investor sentiment. Matching the particular opportunity to the right investor and managing the process to fit the circumstance are critical in a market where even well funded investors remain nervous not to make a mistake as they try to deploy capital.

To find out more about Clearwater’s views on what investors are really looking for, how your business valuation stacks up against others and how to manage a process to achieve the right result, do contact us to meet up informally and confidentially


Raisio Oyj has acquired Big Bear Group, a manufacturer of heritage food brands in the UK, via its subsidiary Glisten Ltd for an enterprise value of £ 82 million. The purchase is being financed through both a cash payment and a loan of £ 45 million. The deal strengthens Raisio’s growth strategy of becoming the leading provider of healthy snacks in Europe and it will provide the company with a stronger foothold in the branded snack and breakfast markets in Britain and Western Europe. Before the transaction, Investec Growth & Acquisition Finance ( which is a division of Investec Bank plc) held a stake in Big Bear and has achieved an IRR of over 37%.

The UK-based women’s fashion retailer Phase Eight has sold a majority stake to Towerbrook Capital. Financial details of the transaction were not disclosed but rumours put the value of the deal at approximately £ 80 million. Phase Eight was bought by Kaupthing, the Icelandic banking group, in a consortium with other investors including Kew Capital in 2007 for £ 51.5 million.

WM Morrison Supermarkets has acquired Ltd, the UK-based online retailer of baby products. The consideration for the transaction has been given as £ 70 million. Following the purchase, Kiddicare will continue to trade independently under the management of Mr Scott Weavers-Wright and Ms Elaine Weavers-Wright. The transaction is currently subject to some undisclosed conditions. Should these conditions remain unsatisfied by 23rd March 2011, Morrisons would be able then to terminate the agreement. According to Mr Dalton Philips, Chief Executive of Morrisons, the acquisition brings not only a respected, successful and fast growing specialist retailer into the Morrisons group but also a robust, scalable and highly advanced technology platform around which will enable the group to begin to build their e-commerce offer.

CNC Collections BVBA, a clothing wholesaler headquartered in Brussels and its own franchisee, was acquired by listed UK fashion SuperGroup, owner of the Superdry and Cult brands. The deal is in line with SuperGroup’s European growth strategy – it will allow them to increase their margins in France and the Benelux, driving their franchise acceleration and opening the possibility of company owned larger format stores in key shopping centres across Europe. The consideration was EUR 40 million, of which EUR 7 million will be paid in cash, EUR 21 million in shares and a further EUR 12 million in shares subject to performance over the next three years. The deal does not require shareholder approval.

Moss Bros Group, the UK-based men’s clothing retailer, is planning to sell its 15 Hugo Boss franchised stores in the UK to Hugo Boss UK Ltd. The consideration for the transaction will be £ 16.5 million in cash, of which £ 4.2 million will be payable on completion, with the remaining £ 12.3 million to be deferred and to be paid in instalments by the end of December 2011. The transaction, subject to the approval of Moss Bros’ shareholders, is expected to be completed on 1st April 2011. The sale is part of Moss Bros’ plans to focus on the company’s own brands and develop a simpler business model. In addition, funds raised will contribute towards the company’s working capital requirements.

British Bookshops and Stationers Ltd, a books and stationary retailer based in the UK, has gone into administration. Zolfo Cooper was acting as administrator and has sought WH Smith as a buyer for the business, who has acquired 22 of the stores out of administration. The consideration was £ 1.05 million. The sale of the remainder of the company continues to be sought.

JD Sports Fashion plc, the retailer of sport inspired fashion apparel and footwear has acquired an 80% stake in Kukri Sports, the sportswear wholesaler headquartered in the UK. Details of the transaction were not disclosed.

Diageo, the premium drinks business with a collection of alcohol beverage brands across spirits, wine and beer categories headquartered in the UK, will acquire Mey Içki, a Turkish wine and spirits producer from Euroasia Beverages Sarl, Actera and TPG Capital for an enterprise value of £ 1.3 million. The transaction is expected to complete in the second half of 2011and is subject to regulatory approval. The deal is in line with Diageo’s growth strategy in emerging markets.