Consumer Sector Comment – July 2015

Dato

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Consumer confidence remains at high levels across many key markets, despite some economic uncertainty around the Greek situation and the falling stock market in China. According to GfK, German consumers – for example – have been feeling more optimistic about their future income than at any point since Germany reunified in 1990 thanks to high employment and strong negotiated pay rises. Meanwhile, in the United States, after wobbling at the start of the year, consumer confidence also rose strongly in June. In the UK, consumer confidence last month reached the highest level in 15 years on the back of low inflation and stronger pay growth. We expect this ongoing confidence to translate into growing appetite for M&A transactions across a wide range of retailers targeting discretionary consumer expenditure.

One retail area that has seen lots of activity in the last few months is sports and leisure. AS Adventure Group stepped up its interest in UK sports and leisure retail by acquiring the Snow & Rock Group from LGV Capital. The deal includes the Snow & Rock, Cycle Surgery and Runners Need chains, a total of 46 shops. AS Adventure Group already owns the Cotswold Outdoor brand which includes 69 stores. The deal will give AS access to the growth categories of snow, cycling and running. As a result of the takeover, the group expects its combined UK turnover to hit €292m. AS Adventure itself was acquired from Lion Capital by Paris-headquartered PAI Partners earlier in the year. The company was established in 1995 and operates three brands across a network of 151 stores in Belgium, Luxembourg and France (AS Adventure), the Netherlands (Bever) and the UK (Cotswold Outdoor).

The Snow & Rock transaction marks the second large acquisition in the UK retail leisure sector in the past few weeks, after ECI Partners saw off strong competition to acquire Evans Cycles from Active Capital in May. While these transactions involve targets with strong high street presence, there have also been a number of deals involving online retailers – for example:

  • Riverside private equity invested in German online bike specialist Bike24;
  • Nordic Capital acquired Danish soccer goods retailer Unisport as an add-on for store-based retailer SPORTMASTER; and
  • German player 21 SportsGroup – which operates 21run.com, 21cycle.com and 21streetwear.com (together with a consortium of investors) – acquired multichannel retailer Planet Sports, a specialist in snow, surf and streetwear.

In a slightly different sub-sector, Clearwater International’s most recent consumer transaction – the acquisition of online and catalogue knitwear retailer Wool Overs by Langholm Capital – is further evidence of continuing interest in the consumer retail space across all channels. We expect plenty of further activity amongst retailers over the coming months across all channels.

 

Selected UK Consumer Deals

Brookfield Property Partners, a Canadian property firm, has agreed to acquire Center Parcs UK from Blackstone Capital Partners. The deal is estimated to be valued at over €3bn.

Frasers Hospitality of Singapore has acquired boutique hotel chains Malmaison and Hotel du Vin Property Holdings Ltd from KSL Capital Partners LLC. The hotels operator had a price tag of €504.7m, paid in cash.

Alcuin Capital Partners and Isfield Investments have acquired The Groucho Club Ltd, a private members club, in  management buyout from Graphite Capital Management. The deal is estimated to be valued at €55.6m.

CrowdSurge Ltd, an online ticket seller services provider, has been bought by Songkick.com Ltd in a merger transaction. Songkick was backed by Access Industries Inc, Index Venture Management LLP and Sequoia Capital Operations LLC.

Privately-owned Ferrero International of Switzerland has acquired 104 year old chocolate retailer Thorntons plc, valuing the group at €155m – a 43% premium to the share price before the deal was announced.

Stokers Ltd, a privately-owned furniture retailer, has acquired Lucas World of Furniture as part of its plans to grow across the UK. We highlighted the activity of furniture retailers in our March sector comment.

Rutland Partners has backed the management of Gardman Ltd, the wild bird care and gardening goods retailer. The vendor group consisted of Goldman Sachs, Barclays, TPG Capital and the Lloyds Banking Group.

Arcelik Anonim Sirketi, a listed Turkey-based manufacturer of home appliances, has acquired a 50% stake in Beko plc for a consideration of €93.75m. Prior to the transaction, Arcelik already owned a 50% stake and voting rights in Beko.

Essenden plc, a leading UK operator of tenpin bowling centres, has agreed to a takeover offer from Indoor Bowling Acquisitions Ltd, a subsidiary of Harwood Capital run by activist investor Christopher Mills. The implied equity value of the transaction is €55.7m.

21CC Group Ltd, the events group known for its pyrotechnics displays, has acquired Online Fireworks Ltd, an online firework retailer.