Consumer Sector Comment – April 2008

Dato

During April, Clearwater attended a conference in Washington where the Global Retail & Consumer Brands team met to discuss various issues and trends in the sector. One particular theme discussed is the desire for UK retailers to enter emerging markets in an effort to gain market share.

Only this month Marks and Spencers has increased its presence in the Indian market through a joint venture with Indian conglomerate, Reliance Group in a move that will establish at least 50 more stores in India. Sir Terry Leahy, CEO of Tesco, recently speaking at a British Chambers of Commerce annual convention stated that “its international business is now making as much money as the group did 10 years ago” and that “we now have more space outside the UK than within it.” Tesco’s main international presence is in Eastern Europe and Asia, while last November the retailer moved into the US market with its Fresh & Easy stores. Clearwater has good connections in India and China through our international network.

Deals Completed in the UK

Carpetright acquires Melford Commercial Properties for £7.2m. Carpetright has completed the acquisition of Melford Commercial Properties Limited, the parent company of Carpetworld Manchester Limited, a floor covering retailer based in the North West of England. Melford is being acquired from Jensen Group A/S of Denmark. Carpetworld operates from 13 locations and has approximately 85 employees. Melford owns four freehold stores and two long leasehold stores, which are all occupied by Carpetworld.

Carpetright acquires Ben de Graaff Tapijt for £6.3m. Carpetright has reached an agreement to purchase the assets and business of Ben de Graaff Tapijt, a retailer of floor coverings and curtains blinds based in the The Netherlands.

Hitchens buys Wallgate for £8.76m. Hitchens Group, the UK-based discount clothing and electrical-goods retailer has acquired Wallgate together with its wholly owned online retail subsidiary Best Price Trading Limited. Wallgate is a well established and successful provider of outsourcing services to major manufacturers, retailers and distributors to maximize their net asset recovery percentage on consumer returns.

Setten and Durward sold out of administration. Setten and Durward, a UK-based maker of stationery products, has been sold to Zcom owned by Alan Morris. No deal value was given.

Dobbies Garden Centres acquires Sandyholm Garden Centre. Dobbies Garden Centres has acquired Sandyholm Garden Centre for £8m. Dobbies’ Chief Executive, James Barnes, said: “We are very pleased to be acquiring a well known and well respected garden centre that extends the reach of Dobbies in our Scottish heartland. This acquisition is consistent with our strategy of owning large freehold garden centres, which will add value to our portfolio and overall business.”

Evans Cycles owning family sells majority interest to Active Private Equity. The owners of Evans Cycles have sold a majority interest in the British bike retailer to Active Private Equity it has been reported for an undisclosed sum.

Travis Perkins acquires 30% stake in Toolstation. Travis Perkins, UK-listed builders’ merchant and home improvement retailer has acquired 30% of Toolstation a direct retailer of tools and building materials for £5m. Geoff Cooper, Chief Executive of Travis Perkins said; “This investment represents a significant advance in the development of our multi-channel strategy. Our customers increasingly expect products from us through a variety of distribution channels, delivered to them or collected by them via a time, place and mechanism that suits their needs.”

Travis Perkins has acquired Newcastle-based ceramic tile retailer Tile It All (UK) Ltd. Tile It All was acquired from owners Stephen and Shirley Bell. The consideration was not disclosed. Geoff Cooper, Chief Executive of Travis Perkins said: “Under the entrepreneurial leadership of Managing Director, Mo Iqbal, our tile businesses are set to become a major force in this attractive and growing market. The acquisition of Tile It All provides excellent growth in our business and branch network and is consistent with our strategy of investing in specific adjacent market segments.”

Fake Bake acquired by UK distributor for £10m. Fake Bake, the Dallas, Texas-based self-tanning brand, has been acquired by Sandra McClumpha, its UK distributor it has been reported. McClumpha now plans to grow the brand internationally following the acquisition.

Hanworth Laboratories Ltd has acquired a 75% stake in cosmetics manufacturer Surefil Beauty Products Ltd. The consideration was reported to be £1.5m.

Adili plc has acquired the ethical clothing brand Ascension. The European activities of Fila, the Italian fashion house, have been acquired by Barclay Ventures and Indian brothers Rajiv and Rajesh Batra. The deal value was reported to be £78.7m. The consideration was not disclosed.

Primary Capital has acquired a majority stake in Pacific Direct, a Bedford-based company supplying soaps and cosmetics to luxury hotels. The consideration was £20 million.

Somerfield sells seven supermarkets to Tesco in estimated £100m deal. Somerfield, announced the sale of seven supermarkets to Tesco, it has been reported. Reports estimated the deal size at £100m.

KMI buys Floraroma for approximately £6m. Floraroma, the female hygiene products supplier, has been sold to KMI, the UK-based male grooming products group it has been reported.

Other Deals

Win Hanverky Holdings Limited, a Hong Kong listed company has formed a joint venture with Diadora S.P.A. Winor International Company Limited will own the trademark “DIADORA” in the Far East and manufacture, design, promote, distribute and sell products carrying the “DIADORA” trademark in Greater China. It has been reported that Win Hanverky and Diadora will hold 60% and 40% respectively of the enlarged capital of Winor.

Alkos Cosmetiques acquires Financiere Beaute for undisclosed amount. French cosmetics company Alkos Cosmetiques has acquired privately-owned competitor Financiere Beaute for an undisclosed amount it has been reported. It has been reported that financial investors CDC, Avenir Entreprises and NCI Gestion would take a 24% stake in Alkos Cosmetiques to help finance the acquisition, while Gieux would retain 76% of the shares.

Bruno Saint Hilaire acquired in a management buy out by Activa Capital for an undisclosed amount. French menswear company Bruno Saint Hilaire has been acquired in a management buy out backed by private equity house Activa Capital it has been reported for an undisclosed sum. Activa Capital has reportedly bought 60% of the company’s shares, while another financial investor, Irdi, took 10% and four managers also invested in the business.

Maisons du Monde bought by Apax Partners and LBO France for undisclosed amount. Apax Partners and LBO France have acquired a majority equity stake in Maisons du Monde a French specialised home decoration and furniture retailer. The management team will keep approximately 20% of the equity and Ixen, a shareholder since 2005, will also retain a minority interest. Reports claim the deal value was between £335-350m or 9.5x EBITDA.

LVMH acquires Hublot from Carlo Crocco for an undisclosed price. LVMH has acquired the Hublot group a high end watchmaker whose portfolio includes TAG Heuer, Zenith, Dior Montres, Louis Vuitton watches, and the watch collections of jewellers Chaumet, Fred and De Beers.

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