Consumer Sector Comment – March 2016

Licensing – the force awakens

First it was Frozen, the Walt Disney animated movie that, almost out of nowhere, became the biggest brand in the toy industry. Back into 2014 shortages of Frozen products sent panic-stricken parents into eBay battles trying to hunt down the most sought after products of the year. Now, just over two years later, the Disney machine has struck again. Star War’s triumphant return to the big screen in 2015 not only saw the breaking of just about every film record going but has also driven an increase in licensed merchandise either through the specialist licensees or through direct to retail agreements ranging from Marks and Spencer to Forever 21.

Robust licensing deals, hot on the heels of the latest movie releases, are behind growth in the toy retailing market, which saw, for example, a 6% increase in sales in the UK in 2015. This was mostly driven by demand for film licenses such as Minions, Avengers, Jurassic World, Star Wars and Frozen which, once again, was the number one toy licence of the year. Movie related toys are now up 28% year on year and hold a massive 15% share of all toy sales.

The popularity of movie related merchandise is increasing and thus licensing has become a hot market. Sambro International, the UK’s leading creator, designer, producer and distributor of licensed children’s products, was acquired last month in a management buy-out backed by Elysian Capital. The company’s products cover a wide range of categories and world famous franchises, including Despicable Me, Cars, Star Wars and Frozen. Sambro, which has more than doubled sales over the last 3 years, is a now a trusted partner to global brand owners such as Disney, Universal and Nickelodeon.

With many more films on the horizon over the next four years – including Finding Dory, The Incredibles 2, Cars 3, Toy Story 4, and Pirates of the Caribbean 5 – the licensing market is expected to see continued growth and interest from private equity and corporates alike. It is a space we know well here at Clearwater International having previously advised a number of businesses in the licensing market including Character World, a licensed bedding specialist, on a €46m secondary management buyout backed by Palatine Private Equity.

Selected UK consumer deals

Global Brands Group, the Hong Kong listed apparel and footwear group, acquired TLG Brands, which owns labels including handbag business Fiorelli. The deal provided an exit for UK private equity owner Synova Capital, who first invested in the business in 2008.

UK variety store chain, Poundland announced that it will acquire a third of footwear retailer Brantano’s remaining stores. The announcement followed the completion of UK private equity firm Alteri Partners’ purchase of the footwear company’s 81 stores and 59 concessions.

LivingBridge, the UK private equity firm, invested in BoilerJuice, the online heating oil retailer which delivers millions of litres to thousands of customers every week.

Essilor International, the France based ophthalmic conglomerate, strengthened its online retailing business with the acquisition of Vision Direct Group, one of Europe’s leading online contact lens retailers.

Kurt Geiger, the UK’s biggest shoe retailer by sales, was acquired by Cinven, the European private equity firm, for €310m.

Homebase, the DIY chain owned by UK-listed Home Retail Group, was acquired by the Australian retailing conglomerate, Wesfarmers, for €446m. The deal marked Wesfarmers’s first acquisition outside Australia and New Zealand.

Piper Private Equity led a €26m investment into affordable luxury jewellery brand, Monica Vinader. Alongside this, US consumer specialist Winona Capital, also invested to help accelerate growth in the US.

Private equity fund manager, Electra Partners, sold its stake in Daler-Rowney, the fine art materials supplier, to Milan-listed art company Fila for €81m.

Gambling companies Paddy Power and Betfair completed their previous announced €2.9bn merger, creating the biggest publicly listed online-gaming company.

Supermarket giant Tesco took full ownership of coffee shop chain Harris + Hoole, acquiring the remaining 51% of the company from Tolley family.

Fanatics, the US based provider of officially licensed sports merchandise, acquired Kitbag, an international sports e-commerce company, from owner Findel plc, for €15m.