Consumer sector comment – January 2011

Date

Last week Clearwater completed the acquisition of UK shoe retailer, Jones Bootmaker for the Dutch based Macintosh Retail Group, which owns well known shoe retailer, Brantano.

The acquisition will add 93 stores to its UK footprint of 150 Brantano stores and turnover of circa £95 million, and provides an exit for Arev Investments and Kcaj, both part of the Icelandic Arev Securities group, which participated in a management buy-in of Jones Bootmakers in 2001.

The retail industry has faced significant challenges over recent months, but this transaction shows that quality businesses in the sector can prove to be attractive acquisition targets. Further consolidation in the retail industry is likely to follow this year, particularly as overseas buyers look to secure a foothold in the UK, competing strongly against private equity buyers who have so far featured predominately in retail auction processes.

Nevertheless Clearwater remains actively involved in private equity transacting and is hosting a Consumer sector Private Equity Review of 2010 on 2nd March at our London office. The breakfast event will look back over the private equity and corporate M&A activity of 2010, including a discussion on notable trends emerging in valuations post credit crunch. We will also preview hot spots in the consumer space for 2011. This will be a free networking event attended by retailer and consumer brand business owners. We will be sending out a reminder invite shortly.

Deals

Amazon.com Inc has acquired the remaining 58% stake in Lovefilm, the online DVD rental company, for a reported £200 million, subject to regulatory approvals. Amazon acquired a 42% stake in Lovefilm in 2008 when Lovefilm took over Amazon Europe’s DVD rental business in the United Kingdom and Germany. The company was founded in 2002 and is led by chief executive Simon Calver, with backing from a private equity consortium that includes Index Ventures and DFJ Esprit. Sales grew 52% a year from an annualised £27.6m in 2006 to £97.2m in 2009.

Greene King plc, the listed pub and brewing group, has acquired Cloverleaf Restaurants, a Blackburn-based restaurant operator for a reported £55.8 million as part of Greene King’s strategy of repositioning itself towards food-driven retail outlets.

Slimma plc the Leek-based women’s wear wholesaler, has sold its Slimma and Splendour brands to N Brown plc via its JD Williams subsidiary, the home shopping retail group which specialises in larger size womens wear. The consideration was £800,000 and as part of the terms of the deal Slimma plc will change its name CDU plc, subject to shareholder approval. Slimma is listed on AIM and has a portfolio of brand names in ladies’ occasion wear including Frank Usher and Michel Ambers.

JD Sports Fashion plc has acquired Champion Sports, a Dublin-based sportswear and footwear retailer. The consideration was not disclosed. However JD has also agreed to loan Champion Sports EUR 17.1 million in order that it may settle debts. The transaction is subject to the approval of the Competition Authority in the Republic of Ireland.

The Bodyshop International plc has sold Soapworks, its Glasgow-based soap manufacturer to a management buyout team led by the current Managing Director, Jan Zadruzynski. Soapworks was set up in 1988 as one of The Body Shop’s Community projects, supplying soaps exclusively to The Body Shop and aimed at providing employment in Easterhouse, a suburb of Glasgow, in need of development opportunities. Today, the factory, which employs 100 full-time staff, is the UK’s largest supplier of soaps and has developed a large and diverse client base. Soapworks also manufactures home fragrance oils, gifts and diffusers. Trade with The Body Shop today represents approximately half of Soapworks’ total business.

Pontin’s, the Ainsdale- based holiday camp operator, has been bought out of administration by Brittania Hotels. Pontins operates 5 holiday parks in the UK and went into administration in November having suffered during the credit crunch and against strong competition from rivals, Butlins and Havens. Britannia Hotels, is a private company, owned by Alexander Langsam and has 36 hotels across the UK, offering 7,000 bedrooms

Daniel Footwear has acquired Sanpaul Ltd (dba Rojo Shoes), a London-based shoe retailer, for an undisclosed amount. Established in 1993, Daniel Footwear sells its own label collection alongside designer labels such as Dior, Camper, DKNY, Juicy Couture, D&G, Armani, See By Chloe and Prada. Based in Leeds, it has shops in 23 shops across the UK.