Consumer Sector Comment – September 2013

Dato

One of the most notable deals last month was the sale by Langholm Capital of premium crisp brand Tyrrells to Investcorp, the Bahrain-based investment group. Investcorp was attracted by Tyrrells’ premium positioning and growing international footprint. The brand, founded in 2002 by William Chase as a sideline at a farm in Herefordshire, saw sales rise 35% to £29.8 million in the year to March 2012. It was sold by Langholm for £100 million.

In a different consumer sector, the enduring appeal of well-established brands was reflected in Spin Master of Canada’s acquisition of the “iconic” Meccano toy brand. Meccano was founded in 1901 and is now based in France. The construction toy category is already dominated by Lego, which itself was established in 1932 and is still going strong – Lego is one of the 4 largest toy manufacturers in the world and its continuing success is reflected in 2012 revenue growth of 25%. Spin Master hopes with the Meccano acquisition to develop the brand further outside its core European markets and challenge the dominance of Lego in construction toys. There are also plans to innovate and grow the brand in new categories. Meccano’s manufacturing base and industrial facilities will remain in France to service European markets.

We expect continuing interest from overseas trade as well as private equity buyers in strong well-established brands offering stable cash flows in existing markets as well as product and market growth opportunities in new categories and geographies.

Deals

Key Travel Ltd, the travel agencies firm focusing on the non-profit sector, was acquired by a MBO Team. The transaction has been backed by Livingbridge, which provided £9 million of funding. Founder Mr Ajaya Sodha is to retain a minority stake in the business.

Risk Capital Partners LLP, the private equity firm, acquired a majority stake in Cruise.co.uk, the company which owns the UK’s largest online cruise websites. The company reported revenues of €64m for the financial year 2012. Luke Johnson, chairman of Risk Capital commented: “As more people research online, leading websites have engaged with users and harnessed social media techniques. Cruise.co.uk has a wealth of content in addition to market leading prices. There is a great opportunity to replicate this model into international markets where cruising and online research are growing rapidly.”

Risk Capital Partners has also acquired a majority stake in Red Hot World Buffet. The buffet restaurant group, which serves English, Indian, Chinese, Italian, Tex-Mex and Japanese dishes, amongst others, has grown from one small site to having seven restaurants. The acquisition will enable Red Hot World to expand its footprint in the restaurant sector and enhance its sales and marketing capabilities.

Imagine Travel, a tour operator, was acquired by Scott Dunn, one of the longest established operators in the luxury travel market. The transaction is in line with Scott Dunn’s growth strategy to increase its market presence. Imagine Travel offers more adventurous luxury travel and the transaction is expected to help them expand into new markets, using Scott Dunn’s expertise and investment. Combined turnover of the two for the coming year should be around £60 million.

uSwitch Ltd, the online and phone-based comparison and switching services for essential home services and personal finance, was acquired by Lloyds TSB Development Capital Ltd, the private equity firm. With this transaction, LDC has acquired a significant stake along with the management who will hold minority holding in uSwitch. Post acquisition, FIG, the vendors, will retain a significant minority stake in the company.

Healthcall Optical Services Ltd, the mobile eye care company, was acquired by Specsavers Optical Group Ltd, the operator of optical goods and eyeglass stores. No further details were disclosed.

Fawsley Hall Hotel and Spa Ltd was acquired by Hand Picked Hotels Ltd, the hotel operator created by former lawyer Julia Hands. Financial details were not disclosed. The acquisition brings the group’s portfolio up to 20.

Bar and restaurant chain The Living Room was acquired from Premium Bars and Restaurants by Stonegate Pub Company Ltd, the managed operator, backed by TDR. The transaction includes acquisition of 13 Living Room sites.

81 Little Chef outlets were acquired by Kout Food Group Restaurants UK Ltd, the UK arm of the Kuwaiti restaurant chain operator. The deal had a value of £15 million. Post acquisition RCapital, the vendors will retain 2 outlets of Little Chef and Kout Food Group Restaurants UK Ltd will retain the brand name of Little Chef.

Arla Foods Amba’s Crediton Dairy milk drinks business was acquired by a MBO Team. The MBO Team was led by former Milk Link chief executive Mr Neil Kennedy and former Milk Link group finance director Mr Tim Smiddy. The new company is called Crediton Dairy Ltd.

St Helen’s Farm, the goat’s milk product manufacturer, was acquired by Kavli, the Norwegian charitable company, which makes Primula cheese. Kavli are planning expand their presence in the UK dairy market. No further details were disclosed. The St Helen’s Farm dairy has 40 employees and produces goats’ milk, cheese, cream, butter, yoghurts and ice cream to supply supermarkets across the country.

Tyrrells Potato Crisps Ltd, the UK based company engaged in the production and supply of potato chips, was acquired by Investcorp, the private equity firm. The deal had a value of £100 million. The acquisition will help Tyrrells to expand its business and accelerate its growth. Langholm Capital acquired Tyrrells in a management buy out transaction in the year 2008.