Consumer Sector Comment – May 2015

Date

Recent deals in the fashion sector are the inevitable result of the huge changes that have taken place in fashion retailing over the last ten years. Where fashion retailing was once largely undertaken by domestic store-based retailers, today the landscape is very different. The internationalisation of fashion brands, the rise of e-commerce and the number of brands setting up their own retail activities have all changed the market – for example: next month, Nike launches its first women’s-only store in the UK, having trialled the female-focused store layout in the US and Shanghai. As these trends continue, we expect more businesses will turn to M&A to develop their strategies. This has certainly been evidenced by some recent transactions.

The most recent example is from the luxury online fashion market where two well-known names announced a deal – Net-A-Porter of the UK and Yoox of Italy. Net-A-Porter was established by former fashion journalist Natalie Massanet, launched from her flat back in 2000. By 2010, the company was shipping to over 100 countries. At that time, brand owner Richemont (owner of Chloe, Cartier and Mont Blanc) acquired a majority stake in the company – valuing it at €490m. The most recent tie-up between Yoox and Net-A-Porter creates an online retailer focused on the luxury market with pro-forma revenues of €1.3bn and equity value in excess of €3.5bn. Richemont will receive €1.6bn of Yoox shares – equivalent to roughly 25x adjusted 2014 EBITDA. Target synergies are forecast at €60m by 2018.

The internationalisation of brands is also creating opportunity. Foschini, the South African retail group, acquired UK women’s fashion retailer Phase Eight at the start of the year. Foschini completed the acquisition because it wanted to roll out the Phase Eight brand in southern Africa and to access Phase Eight’s online capabilities.

Driven by increasing competition in domestic markets and growth opportunities in new and emerging markets, Clearwater International expects to see ongoing cross-border M&A activity in the fashion retail segment over the coming months.

 

Selected UK Consumer Deals

Retail Acquisitions Ltd has acquired BHS Ltd. Retail Acquisitions was set up last year to acquire BHS but may look to make more acquisitions in the future. The firm is backed by a number of investors.

Unilever NV, the listed Dutch consumer goods group, has agreed to acquire Ren Ltd, a premium brand of natural skincare products. The acquisition will help REN to expand internationally.

Wolseley plc, the plumbing and building materials supplier, has acquired a stake in BathEmpire.com, the online retailer of bathroom products. Wolseley had previously sold Bathstore, its specialist retail brand, to Endless in 2012.

The management of Total Fitness Health Clubs Ltd has acquired the company in a management buy out transaction, backed by NorthEdge Capital LLP. NorthEdge, which focuses on backing firms based in the north of England, invested €16.1m in the company and will hold a majority stake.

Aurivo Co-operative Society Ltd, the Irish agricultural co-operative, has acquired My Goodness Ltd, a producer of sports recovery food and milkshake drinks. The deal is estimated to be valued at €14.6m – excluding maximum earnouts of €14.5m – and will enable Aurovio to develop a “leading position in the sports nutrition and protein markets.”

JacTravel Ltd, a provider of online hotel bookings and travel services, has acquired TotalStay Group, a major online accommodation provider to wholesale, retailer and consumer markets. The transaction was supported by Vitruvian Partners which acquired JacTravel in June 2014 for €112m.

Touchbet Ltd, the Malta-based sports betting company, has agreed to acquire Sporting Index Holdings plc, a UK-based sport spread-betting company, from HgCapital.

Dnata, the UAE-based air services provider, has agreed to acquire a 51% stake in Imagine Cruising, the UK-based provider of cruise and stay holidays. The acquisition will expand Dnata’s portfolio and expertise in the growing cruise sector.

Molson Coors Brewing Company (UK) Ltd has acquired the Burtonwood brewery of Thomas Hardy Holdings Ltd. The move follows Molson Coors UK’s longstanding business partnership with Thomas Hardy, which will continue to operate its contract bottling business from the shared site.

Haversham Holdings plc, a listed UK-based investment management company, has agreed to acquire British Car Auctions Ltd (BCA), the UK-based vehicle auction company, from Clayton, Dubilier & Rice. The transaction values BCA on a debt-free, cash-free basis at approximately €1,775m. BCA owns and operates the British Car Auctions and WeBuyAnyCar.com website which it acquired in 2013.