Consumer Sector Comment – May 2009

Date

We are nearly half way through the year and the mood amongst retailers and investors is still very much one of wait and see.

Deal activity is still predominantly being driven by businesses becoming distressed, resulting in owners divesting non-core assets (Eason & Son selling British Bookshops to Endless) or new/former owners buying businesses out of administration (Rinku Group acquiring certain Bay Trading assets).

Some businesses are now beginning to see the benefit of their cost cutting activities over the last few months, with a more efficient approach to marketing and promotions yielding greater profitability. This is the upside of the recession allowing businesses to take the opportunity to review the way that they do business.

On a positive note we are meeting retailers across the spectrum who are having positive like for likes and are anticipating growth, recruiting talent and in some cases seeking to acquire assets in the process.

News Stories

Investors are lining up for a stake in The Hut. Cheshire-based The Hut, the fast-growing online retailer that bought the Zavvi brand earlier this year is seeking up to £7 million of investment in return for a minority stake. Private equity groups are lining up multi-million pound offers. The Hut plans to use the money to fund its buy-and-build expansion strategy. Clearwater Corporate Finance are retained advisers to the company.

Cruise is acquired by a management buyout team. Cruise Clothing, the troubled UK clothes designer chain, has been acquired by its management consisting of managing director John Heath and chief financial officer Iain Baird. The buyout was carried out after Deloitte was appointed as administrator of the chain. Financial details were not disclosed. Cruise was originally acquired for an estimated £7 million in 2006.

Bay Trading assets taken over by Rinku Group plc. Rinku, the privately-held UK fashion retailer, has reached a deal for taking over some of the assets of Bay Trading, the troubled UK youth fashion chain owned by Alexon. Rinku Loomba, managing director of Rinku stated that an agreement had been reached with administrator Deloitte to acquire 80 Bay Trading concessions and some of its outlets. The number of outlets to be taken over is still to be decided. No financial details were disclosed.

Eason & Son sells British Bookshops chain to Endless. Dublin-based Eason & Son, the newspaper-distribution company and bookseller, has sold its UK-based British Bookshops operations to Endless the private equity house which owns The Works, the chain of discount bookstores. The disposal follows a review of the group who opted to concentrate on its Irish retail business.

Wiggle founder sells 26% stake to Livingbridge. Mitch Dall co-founder of Wiggle, the leading bicycle, clothing and accessories retailer, has sold his stake in the business to Livingbridge who provided a £12.3 million refinancing package in July 2006. Mr Dall used the initial Livingbridge investment to launch mobiwasher.co.uk, an online retailer that specialises in selling mobile pressure washers for bicycles. Clearwater Corporate Finance advised the founders on the original deal in 2006.

JD Sports acquires Chausport for 10 million Euros. JD Sports Fashion the leading retailer of sport and athletic inspired fashion apparel and footwear has acquired the entire issued share capital of Chausport SA for a total cash consideration of 10 million Euros. Chausport was founded in 1980 and is a key retailer of sports footwear in France with 78 stores in premium locations.

Clintons puts Birthdays into administration.Clinton Cards has put its Birthdays greeting card chain into administration. The move puts 2,000 jobs at risk. Zolfo Cooper have been appointed as administrator to the 344 store chain. Clinton acquired Birthdays for £46.4m in 2004.

Other Deals

Système acquires 170 stores from Le Mistral. Système U Centrale Nationale, the supermarket operator based in Rungis, France, has acquired 170 stores from Le Mistral SA, a cooperative group based in Entraigues sur la Sorgue, also in France. The consideration was not disclosed.

Toys R Us Inc acquires FAO Schwarz.Toys R Us Inc., the listed Wayne, New Jersey-based toy retailer, has acquired FAO Schwarz, the New York-based toy retailer. The consideration was not disclosed. Toys R Us will continue to operate the FAO Schwarz stores and will now run their e-commerce and catalogue operations, with all FAO Schwarz operations continuing to trade under their own name.

Fenix Outdoor acquires Rosker. Fenix Outdoor AB, a Sweden-based outdoor clothing and accessories wholesaler, has acquired Rosker Ltd, a Gosport, UK-based outdoor and adventure clothing wholesaler. The consideration was not disclosed.