Consumer sector comment – March 2013

Date

A couple of transactions last month highlighted the continuing attraction of strong British brands to both private equity and trade, based on their potential for international development. Lion Capital acquired hair straightener brand, GHD for £300 million and Iconix bought denim brand, Lee Cooper. This comes after Iconix’s earlier acquisition of Umbro for £137 million from Nike, which completed in December 2012. Iconix paid £47 million in cash for the Lee Cooper brand, which is sold in over 80 countries and represents around £500 million in global sales. Iconix is a leading global licensor and owns a stable of brands, including Peanuts, Candie’s, Rocawear and London Fog. As well as the recent transactions involving Lee Cooper and Umbro, the company has made a number of acquisitions and joint ventures over the past 4 years in China, India, Europe and Latin America with the aim of growing international exposure.

The growth potential that can be achieved via careful brand development was a driver for another apparel transaction earlier in 2013, this time at the luxury end of the market. In January, PPR took a 51% stake in British fashion house, Christopher Kane. The label becomes PPR’s third British ready-to-wear brand, following a joint venture with Stella MCartney and a majority stake in Alexander McQueen. It is seen as a low risk acquisition strategy for the luxury group – Christopher Kane is currently small relative to PPR, with sales of around £10 million. Brand development is planned in 3 phases: opening of a London store in 2014; then growth in accessories; followed by Asian expansion. PPR commented “what really matters to us is not size or profitability but what a brand can become tomorrow”.

Deals

JD Sport Fashion Plc acquired Cloggs UK Ltd, the branded online footwear retailer, and Gio Goi Ltd, the fashion designer and retailer. Both companies were acquired from administration, for an undisclosed sum. The move will provide an opportunity for JD Sports to diversify their online business and strengthen their high-street presence.

The British denim brand Lee Cooper was acquired by Iconix Brand Group Inc, a large licensor, for £42m in cash. The company is moving into the upmarket sector and aims to grow its global footprint.

Lion Capital acquired the British hair straightener manufacturer Jemella Group Ltd which trades under GHD for approximately £300m. First acquired in 2007 for £160m by Montagu Private Equity the company has since managed to double their profits. Lion capital is planning to export the brand in the US and Europe.

Jessops Group Ltd, the photographic retailer that went into administration in January 2013, has been acquired by a group of private investors including Peter Jones. The entrepreneur who also owns Phones International acquired the brand and specific assets.

Oakman Inns announced the acquisition of The Cook and Fillet, a restaurant and farm shop operator. The target formerly knows as The Crooked Billet has been developed at a cost of £650,000. The farm shop element provides a reliable source of income and the supply of ingredients for their restaurants.

Isango!, the tours and activity provider that operates isango.com, loveorlandotickets.co.uk and justlondontheatrebreaks.com, has been acquired by the accommodation and destination arm of TUI Travel. The acquisition will boost the tours, sightseeing options and activities offering. The number of complementary services purchased when booking a holiday has increased significantly in recent years, Euromonitor predicts a further 7% growth by 2015.

The hotel and conference chain Principal Hayley Group has been acquired by the US property investor Starwood Capital Group LLC, for an estimated £360m. Starwood has shown increasing interest in the European hospitality sector. It previously acquired the Louvre Hotel Group which has over a 1,000 hotel in 39 countries.

The gluten-free food specialist and market leader Genius Foods has acquired Livwell Bakery and United Central Bakery from the Finsbury Food Group for an estimated £21m. The acquisition will enable Genius Food to manufacture a larger range of products.