Portfolio reorganisation has been a key driver of international M&A in the consumer sector. Multinational companies with large product portfolios have sought to refocus activities through disposals. Meanwhile, acquirers have been keen to purchase brands: whether well-established brands with strong market positions or younger brands with strong growth potential. Portfolio reorganisation is a trend we have seen across a wide range of branded consumer product areas including the personal care, beauty and food & beverage markets, to name but a few.
P&G is one such business that has been realigning its interests in the pet food market and more recently announced plans to sell its Duracell batteries business. April saw one of the year’s largest consumer sector transactions with the acquisition by Mars of P&G’s US pet food businesses for around $3 billion. P&G has been streamlining its activities to focus on its main home and personal care businesses. In August, Mars exercised an option to purchase P&G pet food businesses in Asia, the Middle East and Africa. This month, Spectrum Brands of the US announced that it would be acquiring P&G’s European pet food business, with approximately $200 million of annual sales.
The pet market has been an attractive area for M&A activity over the past couple of years, with trade and private equity drawn to strong sector trends. Markets as diverse as Russia and India are seeing enormous growth in the pet food sector. Meanwhile, more established markets such as Europe and the US have demonstrated resilience through the recession. Increasing premiumisation has also been a trend, as well as growth in new product categories – from pet ice lollies to organic food and spa treatments. Against this background, M&A has been driven by buyers looking to add higher growth brands to existing portfolios by acquiring innovative smaller companies. Clearwater International has a long track record of completing deals in the pet market including transactions with a pet food manufacturer, an animal hospital and an online pet medicines supplier. On the back of attractive sector dynamics, we are confident that activity levels will remain high over the coming months.
Other UK Deal Highlights
Itochu Corp and Shandong Jining Ruyi Woolen Textile Co Ltd, a Chinese manufacturer and producer of woollen textile products, have agreed to acquire an undisclosed minority stake in TM Lewin Ltd, the branded multichannel shirt retailer. The deal should support TM Lewin’s expansion into the Chinese market and follows a stake taken by Itochu, a key supplier to the company, 3 years ago.
Batteries Plus Bulbs, the US-based retailer of batteries and specialty light bulbs, has acquired LED Hut Ltd, an online retailer of bulbs and lighting products, for a reported sum of £18 million. LED Hut reported revenues of £17m and profits of £0.75m in 2013. The acquisition marks Batteries Plus’ entry into Europe.
Worldstores Ltd has acquired online baby product retailer Kiddicare.com Ltd from Endless LLP, which purchased the company in July 2014 from supermarket group Morrisons. Joe Murray, the joint CEO of Worldstores, commented: “Kiddicare is a fantastic strategic fit for us – its customer base is very similar to our core Worldstores demographic and is at a life stage where it’s buying for the home, so there are many cross-marketing opportunities. Kiddicare has built a great reputation with both its customers and suppliers and we look forward to creating an exciting long term future for the business and its employees.”
Dnata, the UAE-based travel group and a subsidiary of airline Emirates, has agreed to acquire Stella Travel Services (UK) Ltd (STS), a leading UK-based travel agency. STS comprises of five brands: TravelBag, Travel2, Sunmaster, Global Travel Group and Triton Rooms. STS generated annual revenues of £166m, operating profit of £2.5m for the year ended 30 June 2013. The deal comes 7 months after Dnata acquired Gold Medal from Thomas Cook.
Egyptian-based Sakkara Group International (SGI) has acquired Mosaic Holidays Ltd, a travel agency operator. The consideration was not disclosed. Mosaic Holidays specialises in holidays to the Middle East, Northern Cyprus, North Africa and Indian Ocean. Mr Baher Ghabbour, chairman of SGI, commented: “SGI’s expansion in the UK will enable our family of brands to provide more in-depth destination expertise and hands-on in-country support throughout the region.” SGI owns and operates several hotels, cruise companies and tour operators, including US brands Central Holidays and STI Travel.
Vodafone Group plc, the listed mobile communications company, has agreed to acquire 140 stores of Phones 4u Ltd, the UK-based retailer of mobile phones and mobile phone contracts, for an undisclosed consideration. The deal is estimated to be valued at £12.4m.
The management of The Book People Ltd, a book retailer, have agreed to acquire the company in an MBO backed by Endless LLP, the private equity firm. The management team was led by CEO, Ms. Seni Glaister. Since 2008, Endless has also been invested in The Works, a discount retailer of books, gifts and stationery.
The management of Water Babies Ltd, the UK-based company engaged in providing swimming lessons for toddlers, babies and children, has acquired the company in an MBO transaction for an undisclosed consideration. Water Babies’ network of operations across the UK and Ireland regions generates annual revenues of £20m. Coutts & Co provided financing for the acquisition. The transaction is in line with Water Babies’ strategy to expand its footprints in the European, North American and Australasian markets.
Electra Partners LLP, the private equity firm, has acquired The Original Bowling Co Ltd (TOBC), which operates ten pin bowling centres, for a consideration of £91m. Electra invested £51m of equity alongside the management of TOBC and raised the remaining amount through debt provided by GE, Barclays and Lloyds. The transaction will enable TOBC to improve its existing portfolio and make strategic acquisitions. Peter Boddy, the former MD of Fitness First and CEO of Maxinutrition, will join the board of TOBC as non-executive Chairman.
Sun Capital Partners has acquired restaurant chain Strada Trading Ltd, from Tragus Ltd for a consideration of £37m. The acquisition will enable Sun Capital to expand the restaurant business of Strada, as well as transform it into an all-day coffee destination for customers.
Mount Kellett Capital Management, the US-based private equity firm, and Westmont Hospitality Group Inc., the Canada-based owner and operator of luxury, boutique and large conference hotels, have acquired The Lowry Hotel Ltd, the UK-based owner and operator of luxury hotels, from Rocco Forte & Family Ltd for an undisclosed consideration. The transaction is in line with Rocco Forte’s strategy to focus on hotels with larger international business and leisure markets.