Consumer Sector Comment – October 2013

Date

The headline transaction in the UK consumer space this month was Suntory’s agreement to acquire the iconic Lucozade and Ribena brands from GlaxoSmithKline (GSK) for £1.35bn. The transaction is awaiting regulatory clearance and is expected to be completed by the end of the year. Lucozade, the sports drink, was launched in 1927 and Ribena, the blackcurrant drink targeted at children, was launched in 1983. The two had revenues of £500-600m last year. Following a strategic review, GSK said in April that it would sell the brands by the end of the year, reflecting the group’s decision to concentrate on a core portfolio of consumer healthcare brands, with potential in emerging markets.

Suntory, the Japanese brewing and whisky company, has already shown its interest in Western soft drink brands, with the acquisition of Orangina from Blackstone and Lion Capital in 2009 and is seeking to reduce further its dependence on its domestic market. The company held Japan’s largest IPO this year and is planning to spend as much as £3bn on acquisitions. The move by Suntory comes after Japanese vinegar company Mizkan’s acquisition of Sarsons vinegar and Branston pickle from Premier Foods, illustrating the increasing interest of Japanese companies in expanding outside their domestic market. Another example in the last week was the acquisition of Supercell, the Finnish tablet games developer (Clash of the Clans and Hay Day), by Japanese wireless group Softbank for US $1.5bn.

Deals

Cooper’s of Stortford (Enterprise Department Ltd), the home and garden retailer, was acquired by French home shopping brand Damartex, enabling the group to enlarge its market share in the UK. The deal had a value of £25 million. No further details were disclosed. The Cooper’s management team will be kept in place, reporting in to Damart UK, and the company will be kept as a standalone business.

Hong Kong-based Fung Capital, the private investment company run by the Li & Fung owners, has announced the acquisition of Savile Row tailoring house Kilgour (JMH Tailoring Ltd) from JMH Lifestyle. Financial details of the deal remain private. Kilgour will join the recently founded Savile Row Brands portfolio of brands, owned by Fung Group. Founded in 1882, the tailoring firm was acquired in 2008 by JMH Lifestyle, owner of another Savile Row brand, Bernard Weatherill. It has been reported that Fung Capital may be planning the purchase of another Savile Row tailor.

French group LVMH Moet Hennessy Louis Vuitton SA – known for brands such as Louis Vuitton, Celine, Fendi and Kenzo – acquired a majority stake in young British footwear designer Nicholas Kirkwood Ltd for an undisclosed sum. The acquisition is in line with LVMH’s commitment to nurture new design talent in the fashion industry.

Equistone has taken a majority stake in snacks and baking products firm Whitworths, in a deal that values the company at £90m. Equistone said its cash injection will be used to develop new products and scout out possible acquisitions to expand the business further. Whitworths, founded in 1886, has been owned by private equity house European Capital since 2006 and is the country’s biggest supplier of dried fruit, nuts and seeds. The company posted revenues of £157.3m in the year to April 2013.

Lavenham Leisure Limited, the manufacturer of quilted jackets and accessories, was acquired by Fred Perry Ltd for an undisclosed sum. This was Fred Perry’s first acquisition. Lavenham was established in the Suffolk village of Lavenham in 1969 and has its roots in equestrian clothing.

David Lloyd Leisure, one of Britain’s biggest health club chains, has agreed a takeover deal with private equity group TDR Capital. The deal had a value of £70 million. The transaction is in line with TDR’s strategy to expand its foot prints in the fitness segment. TDR plans to invest a further GBP 50m in DLL to expand and enhance its facilities. “With the support of TDR we are confident we will be able to deliver our future growth ambitions,” Scott Lloyd, DLL chief executive and son of founder and former British Davis Cup captain David Lloyd, said in the statement.

Cote Restaurants Limited, a French style restaurant chain, was acquired by CBPE Capital LLP, the private equity house. The deal had a value of £100 million. Following the deal, CBPE will back the existing management team to continue the chain’s growth.

Müller Dairy UK has acquired Nom Dairy UK for an undisclosed fee as part of a move into the own label yogurt market. Heiner Kamps, chief executive officer of Müller, said: “We believe that there are strong opportunities in the UK private label yogurt sector and the Telford facility will help us to realise our plans to provide customers with great products in this important market.” Müller’s move follows other recent acquisitions in the UK by Müller UK, including fresh milk processor Robert Wiseman Dairies and a chilled desserts factory in Shropshire.

Bernard Matthews Limited (Controlling Stake), the UK based company producing oven-ready turkeys, fish and other meat products, was acquired via an IBO by private equity firm Rutland Partners LLP. The deal had a value of £20 million. The acquisition will enable Bernard Matthews to focus on its business improvement combined with product innovation and investment in its brand which will enhance its future growth and development.