Consumer Sector Comment – December 2015

Dato

A Taste for Tradition

We have commented in the past on the rise of the experience economy, as consumers increasingly look to spend on products and services which create or remind them of an experience. One beneficiary has been the craft and hobby market with its roots in nostalgia. The value of the US craft and hobbies industry alone is estimated at in excess of €30 billion, and the category holds plenty of attraction to investors. In April this year, US online craft marketplace Etsy completed an IPO, valuing it initially at €1.7 billion. The shares have since slipped back but rose during day 1 trading to give a heady €3 billion valuation, despite the company being loss-making. Etsy was followed this month by London-based LoveCrafts, a crafting community and marketplace (with sites LoveKnitting.com and LoveCrochet.com), which raised €20 million in funding. LoveCrafts distributes to customers in over 100 countries worldwide.

Reflecting further potential in both the US and UK craft and hobby markets, Clearwater International advised the management of multichannel operator Ideal Shopping last month on their acquisition by Blackstone. Ideal Shopping sells speciality craft products to dedicated crafting hobbyists as well as home, leisure, health, beauty and fashion products. Create & Craft is the only dedicated channel to sell specialist craft products and operates 15 hours a day. The group operates live and pre-recorded channels across all the major UK TV platforms – Sky, Freeview, Virgin Media and Freesat – as well as multiple internet sites.

Interest in more traditional hobbies / crafts is not just confined to the adult market. While there is undoubted interest amongst children in the latest console and mobile games, there is also a desire from parents to re-balance with more traditional and “productive” activities. According to NPD, arts and crafts was the second fastest growing type of toy in 2013 – up 14%.

Private equity has shown particular appetite for this area. In 2010, US PE Firm Berkshire Partners backed traditional toy and craft company Melissa & Doug, which has been rapidly extending its craft offerings – these are consumables which need replenishing and thus require repeat purchases. Meanwhile, Propel Private Equity has been pursuing a buy-and-build strategy in the traditional toy and hobby sector under the Alex brands banner. Recent acquisitions include the Shrinky Dinks toy brand – activity kits based upon plastic sheets that can be cut and coloured and then hardened in an oven into various shapes.

Looking forward, we anticipate continued appetite for companies tapping into the ongoing growth in traditional activities across both juvenile and adult consumers.

Selected UK Consumer Deals

Palamon Capital Partners has agreed to acquire The Rug Company, a manufacturer and retailer of rugs, from Piper Private Equity Limited and Suzanne and Christopher Sharp, the founders.

 

NorthEdge Capital has backed the management of Arthouse Limited, a specialist in wallpaper and associated home furnishings, in a secondary management buyout of the company from Total Capital Partners.

 

Mayfair Equity Partners has agreed, along with management, to acquire YO! Sushi Ltd from Quilvest SA.

 

Euroflorist Sverige AB, a Swedish network of retail florists, has acquired Colonial Gifts Limited (trading as iFlorist), an online marketer of floral and gift products, from US-based 1-800-Flowers.com, Inc.

 

Alteri Partners LLP, backed by Apollo Global Management, has acquired shoe retailers Jones and Brantano UK from Netherlands-based Macintosh Retail Group, for a total consideration of €17m.

 

TDR Capital has agreed to acquire an undisclosed minority stake in forecourt retailer Euro Garages Ltd for a consideration of €1.8bn. The investment will allow Euro Garages to grow its business in the UK and internationally.

 

Treasury Wine Estates Ltd has agreed to acquire a majority of the US and UK-based wine business of Diageo plc. Treasury Wine has agreed to pay total cash consideration of €525m.

 

Electra Partners and Exponent Private Equity, along with the management of PhotoBox Limited, have agreed to acquire the company, in a management buyout transaction from Index Ventures.

 

Equistone Partners has agreed to acquire Sportsbikeshop Ltd, the UK-based online retailer of motorcycle helmets, clothing, and accessories, for an undisclosed consideration.

 

True Capital Partners has acquired a 60% stake in Ribble Cycles, a manufacturer of bicycle and related accessories, from the Dove family.

 

Sport-Tiedje GmbH, a German retailer of fitness equipment online, has agreed to acquire Laidir Leisure Ltd (trading as Powerhouse Fitness), the UK-based supplier of fitness equipment.

 

CVSL Inc, a listed US direct selling group, has acquired Betterware Ltd. This acquisition will sit alongside its existing UK home shopping operation Kleeneze.

 

Exponent Private Equity has acquired a majority stake in Wowcher Ltd, which operates an e-commerce marketplace connecting merchants to consumers by offering goods and services at a discount, from Daily Mail and General Trust plc for a consideration of €70m.

 

Cox & Kings India Limited has acquired Late Rooms Ltd, the hotel booking agency, from TUI AG for a total consideration of £8.5m. This acquisition is in line with Cox & Kings’ strategy to expand its global online and B2C leisure business.

 

Activision Blizzard Inc, the US games software company, has agreed to acquire King Digital Entertainment, the Irish (US listed) creator of the Candycrush game.

 

Brait of South Africa has agreed to acquire a 38% stake in Iceland Foods from Lord Kirkham and The Landmark Group, for €240m.

 

Stoneacre Motor Group, the UK-based multi-franchise car dealership, has acquired Huntson Holdings plc, the UK-based car dealership, from the Preistnall family.

 

Vertu Motors plc has acquired SHG Holdings Limited for a total cash consideration of approximately €20m, including earnouts of €2m.