Consumer sector comment – April 2013

Date

A transaction, which caught everyone’s eye in the consumer space this month was Tesco’s acquisition of the Giraffe chain of restaurants for £48.6 million from Risk Capital Partner (RCP) and 3i. Risk Capital Partners sold its minority stake as part of the transaction, after seeing the chain grow from 7 central London restaurants at the time of its investment in 2004 to 48 locations across the UK and a franchise in Dubai. Giraffe’s growth attracted 3i as a co-investor in 2006. Luke Johnson, chairman of Giraffe since 2004 commented “Giraffe could be a national business; the deal with Tesco vindicates this vision.” Tesco will be able to bring economies of the scale to the operation and the acquisition helps Tesco find alternative uses for space in some of its larger stores to “create retail destinations that offer customers even more choice.” The Giraffe deal comes after Tesco’s purchase last autumn of a 49% stake in specialist coffee chain, Harris & Hoole. Harris & Hoole currently has 13 outlets and plans to open an additional 15 in central London.

Another interesting transaction in the restaurant sector was Lite Bite Food’s acquisition of Scalini, an iconic Chelsea-based Italian restaurant. Lite Bite plans to open Scalini outlets in Moscow, Dubai and India over the next year. Lite Bite is based in India and owns the Punjab Grill brand, which has 60 outlets, including those in Singapore, Bangkok and Abu Dhabi and plans for expansion into North America, Europe and other parts of the world. Meanwhile, second round bids were also due in for Côte Brasserie, the fast-growing French restaurant chain backed by the business tycoon Richard Caring and thought to be worth around £120 million. This continues a trend seen in 2012 of high levels of interest in the UK restaurant sector from trade and private equity buyers.

Ecommerce remains an active space and Clearwater was delighted to have advised the owners of Party Delights on its sale to Party City. Party Delights is one of the UK’s leading online retailers of party goods and is another deal which demonstrates the interest of US consumer businesses in the UK market.

Deals

Aurum Holdings, the British jewellery retailer, was acquired by Apollo Global Management from Landesbanki Islands for an estimated £175m. The company own famous brands such as the “Watches of Switzerland”, “Mappin & Webb” and “Goldsmiths”.

Dreams Plc was acquired by Sun Capital Partners for £35m. The deal includes 171 Dreams stores, but will result in the closure of 95 stores. Dreams was placed into administration after their debt level reached an unsustainable amount of £279m.

Mobeus Equity Partners has helped finance the £10m MBO of Gro Group, a specialist manufacturer of baby sleeping bags. Managing director Christian Jones has increased company earnings by 418% in his first two years and turnover in 2013 is estimated to be around £12m.

Blockbuster UK which fell into administration in January 2013 has been acquired by private equity Gordon Brothers Europe for an undisclosed sum. The deal includes 264 of the 528 stores across the UK. The chain has suffered from the launch of online stream film providers such as Netflix and Lovefilm.

Party Delights, a retailer of party good and related items, has been acquired by US based Party City which owns 750 company owned franchise stores in the US and South America. Founded in 2001 by Alison Graham the company now employs over 100 staff and is targeting £14m turnover this year.

US based KSL Capital Partners has acquired hotel operator chains Malmaison and Hotel du Vin for an undisclosed sum. They plan to invest “significantly” to develop the UK brand and expand further in the UK and Europe. The hotels’ parent company, MWB Group Holdings, called in administrators in November after being unable to cover their liabilities.

Tesco Plc has agreed to acquire Giraffe Concepts, a family-focused restaurant chain from Risk Capital Partners Ltd and 3i Group for a total consideration of £48.6m. It comes shortly after Tesco acquired a 49% stake in Harris + Hoole and an undisclosed investment in Euphorium Bakery.

The London based Italian restaurant chain Scalini has been acquired by Lite Bite Foods owner of fine-dining restaurant Punjab Grill and quickservice chain Street Foods. The acquirer aims to expand the Italian restaurant abroad in Moscow, Dubai and India.

Boutinot, a UK-based wine producer, importer and distributor, was backed by Barclays Bank and Araldica Castelvero the company’s main supplier in an MBO led by managing director Dennis Whitley. In addition to supplying UK and international restaurants, retailers and wholesalers, the company owns various vineyards and manufacturing facilities.

The poultry processor 2 Sisters Food Group has acquired Vion UK’s red meat and poultry businesses. The acquisition will help to meet increasing demand from 2 Sisters’ poultry customers and further diversify the company’s offering to include red meat.