Consumer Sector Comment – April 2014

Date

We continue to see plenty of M&A activity in the Consumer space as consumer confidence in the UK and Europe recovers. The GFK (UK) consumer confidence index grew last month to its highest level since August 2010. Meanwhile, European Commission data showed the sharpest monthly rise in consumer confidence since April 2007. Last month was the first time wages have grown faster than inflation in the UK, giving further reason for optimism.

The nursery and baby products sector is one which has seen some interesting developments over the past few months on both the retail and the product side. The sector remains fragmented with plenty of scope for consolidation and should benefit from strengthening consumer confidence. In March, online nursery retailer Direct 2 Mum acquired BambinoDirect Ltd, another online retailer. In addition to its retail arm, Direct2Mum also provides a virtual community for those seeking advice on pregnancy and parenting which includes discussion forums, blogs and guides, as well as pregnancy tools such as a due date calendar.

Meanwhile, supermarket giant Morrisons announced the sale of Kiddicare as part of a major business restructuring. Morrisons acquired Kiddicare in 2011 for £70 million as a pureplay online retailer but has since opened 10 stores in former Best Buy shops. This is a significant about turn for Morrisons, who originally acquired Kiddicare to provide it with e-commerce expertise and additional non-food sales. Since Morrisons entered into an agreement with Ocado for providing an outsourced online grocery service, the need for Kiddicare has obviously changed. The challenge now will be selling Kiddicare as a multi-channel retailer with some significant retail estate assets.

Dorel Industries of Canada, which is active in both the bicycle and baby markets, acquired Tiny Love, the award-winning Israeli infant developmental toy brand, earlier in the year. Tiny Love has annual sales of $45m across more than 50 countries with a particularly strong presence in Eastern Europe, an important part of Dorel’s growth strategy.

An additional cross-border transaction in the sector was the acquisition of Stokke of Norway by investment vehicle NXMH. Stokke, a family-owned business for 80 years, makes high end baby equipment including the Tripp Trapp chair which can be adapted in height as a child grows. NXMH is controlled by the founder of the Ne xon online gaming company, based in Korea. The deal should help Stokke establish a stronger position in North America and Asia, especially China where there is expected to be significant sector growth with the loosening of the one child policy.

Another recent investment in the sector is Riverside’s acquisition of Spanish pushchair company, NJoy Baby. NJoy is best known for its innovative reversible umbrella stroller which allows the child to face in either direction and will be an add-on to Riverside’s existing Baby Jogger business. We expect strong interest in the sector to continue, buoyed by positive demographic and economic trends.

More Deals

Lifetime Brands Inc has acquired La Cafetière Ltd, a UK-based designer of goods for brewing and serving tea and coffee, from The Greenfield Group Ltd. The transaction follows the acquisition of KitchenCraft by Lifetime Brands earlier in the year, a deal in which Clearwater Corporate Finance advised the shareholders of KitchenCraft.

TPG Capital has acquired a majority stake in Victoria Plumb. TPG Capital will partner with the founding Walker family to back Victoria Plumb’s Chief Executive Jason Walker. TPG’s investment will help the company accelerate its growth. Established in 1999, Victoria Plumb is the largest UK online and mail order bathroom brand and one of the largest retailers of bathroom products and furniture in the UK.

B&M Retail Limited (B&M), a portfolio company of Clayton, Dubilier & Rice, has acquired J.A. Woll Handels GmbH (Jawoll), the German operator of self-service discount outlet stores, along with management. Jawoll was put up for sale in October by its owners. The company reported revenues of €155m for the financial year 2012 and has total of 50 stores in Germany. The acquisition will enable discount retailer B&M to expand internationally and will provide access to Europe’s huge discount market. B&M has plans to float via IPO later in the year.

Moo Limited, the operator of Preloved, one of the largest online classified sites in the UK, has been acquired by The Hut Group Limited. Established in 1997, Preloved was launched as a part-time project by its founder Ian Buzer. In little over a decade, the site was achieving 15m page views per month and was recognised as the number two classifieds site in the UK. Preloved is currently home to 1.7m active users and has circa 100m page impressions per month.

Kitwave Limited, a portfolio company of NVM Private Equity which distributes tobacco, alcohol, confectionery and soft drinks, has agreed to acquire Eden Farm Ltd, the UK-based frozen food and ice cream wholesale and distribution company. Eden Farm generated a turnover of £40.74m in 2013. The acquisition will enhance Kitwave’s current product portfolio and customer base.

Patisserie Valerie Limited, a portfolio company of Risk Capital Partners which owns and operates cakes and patisseries stores, has acquired Philpotts Limited, the sandwich and salad retail stores operator, for an undisclosed consideration. Philpotts reported turnover of £10m and EBIT of £0.71m for the year ended June 2013, with a workforce of 206 employees and 21 branches nationwide. The acquisition will join the existing brands under Patisserie group.

World Of Sweets Ltd, a subsidiary of Hancocks Confectionery Ltd engaged in wholesaling businesses of chocolate and sugar confectionery, has acquired JTS International Ltd, the UK-based company engaged in the manufacturing and supply of confectionery products in the wholesale and retail sector. The transaction is in line with Hancock’s strategy to expand its customer bases, product bases and direct distribution activities and also enables Hancocks to provide a much broader range of wholesale confectionery to the retail and leisure markets.

The management of Kondor Limited, the mobile and consumer electronics accessories supplier, have acquired the company in a management buyout transaction backed by H.I.G. European Capital Partners. The transaction is in line with Kondor’s plans to continue to expand in the UK and internationally. Kondor expects to generate revenues of over £100m in 2014.

Exponent Private Equity has acquired online whisky manufacturer and retailer Loch Lomond through Loch Lomond Group, a new company which is majority owned by Exponent with the company’s management owning a minority stake. Financial terms were not disclosed.