Consumer Sector Comment – March 2015

Date

The global M&A markets have recently been experiencing an uplift in activity from the furniture retailers.

The UK has already seen a lot of activity in 2015, reflecting growing confidence amongst consumers, strength in the housing sector and increased comfort with online shopping for big ticket items. It is estimated that online purchases in the furniture and flooring sector in the UK have almost doubled to around 11.4% since 2010. The past few years have seen the emergence of a number of online specialists in the sub-sector, mirroring developments in the US – where online furniture retailer, Wayfair raised €300m in an IPO in 2015, valuing it at €2.85bn.

In Europe, online start-up furniture retailer Home24 – backed by Rocket Internet (an incubator and venture capital firm) – based in Germany, has expanded into a number of other markets including France, Austria, the Netherlands and Switzerland as well as Brazil as it aims to “take down IKEA”. In the UK, Made.com – which has described itself as a “brand that’s revolutionising the furniture industry” – is looking for a flotation which could value the business in excess of €140m. The company now has four showrooms as well as the online offering, with a growing international business – currently 24% of revenues. Meanwhile, fellow online retailer Sofa.com was acquired by CBPE: the firm is backing CEO Gareth Williams and the existing management team to continue to grow the business and bring the brand to new customers across the UK. Further new showrooms are planned during the course of 2015 and over the next five years.

It’s not just the online furniture retailers which are seeing interest from investors – last year, Key Capital Partners sold bespoke furniture and interiors maker Neville Johnson Group to Alcuin Capital Partners in a €28.4m transaction. The vendor enjoyed a 3.8x money multiple on its original investment. SCS Sofas has also seen a change in fortunes, since being bought out of administration by Sun European Partners in 2008. The company floated at the start of this year and was quickly followed by DFS (which acquired Sofa Workshop in 2013 and Dwell in 2014) with a valuation of €770m. Chief exec Ian Filby said: “Our vision is to take DFS from being a great British business to a world class business. This is an exciting time for us as we continue to drive growth initiatives that are already underway against a backdrop of an improving macroeconomic environment.” In a further indication of sector strength, Dreams (also backed by Sun Capital) announced the benefits of its turnaround strategy – achieving EBITDA of €9.5m compared to a loss of €4.9m the previous year.

On the back of positive growth trends in the furniture and household sector, as lower energy prices feed into disposable incomes, we expect to see deals activity levels remaining high. Clearwater International has plenty of past sector experience through involvement in transactions such as advising the shareholders of David Phillips, the leading furniture supplier to the professional residential property market, in an MBO with backing from FF&P private equity.

 

Selected UK Consumer Deals

Samsonite International, the designer, manufacturer and distributor of luggage, bags and travel-related products, has acquired Rolling Luggage, an airport retailer of branded luggage and travel accessories, from Tie Rack Retail Group for a cash consideration of €22.4m. Ramesh Tainwala, Samsonite chief executive, said: “Rolling Luggage is an exciting new addition to Samsonite and is unlike any of our previous acquisitions. It immediately allows us to expand our footprint in the travel retail sector, an area in which we see great potential for further growth.”

Poundland Group plc has agreed to acquire 99p Stores Ltd for an enterprise value of €78.2m, comprising a cash consideration of €67.5m and the issue of new Poundland Shares with a value of €10.7m. The acquisition is conditional on the approval of the Competition & Markets Authority.

S.C. Johnson & Son Inc, the US-based household products manufacturer, has won an auction to acquire Deb Group Ltd, a manufacturer of dispensers, hand cleansers and skin creams, from private equity firm Charterhouse Capital Partners. The acquisition will enable S.C. Johnson to expand its presence in the industrial and institutional markets.

Findel has agreed to sell its catalogue retailer Kleeneze to Trillium Pond, a subsidiary of US group CVSL, in a deal valued at €5.1m. Kleeneze, Findel’s smallest business, supplies a range of household, kitchenware and health & beauty products across the UK and Ireland.

A.G. Barr plc, the listed UK-based soft drink manufacturer, has acquired Funkin Ltd, a UK-based producer of cocktails, from its founding shareholders for a consideration of €23.4m and an additional cash payment of €6.4m based on certain performance-related targets. The acquisition is in line with A.G. Barr’s strategy to reinforce its portfolio and enter into a new segment of cocktail mixers.

British Gas has agreed to acquire the remaining 79% stake that it does not already own in internet of things specialist AlertMe.com for €62.5m. The deal cements the previous partnership between the two companies, with AlertMe providing the software platform for British Gas’ Hive smart thermostat system.

Exponent Private Equity has acquired Big Bus Tours, the open-top sightseeing tour operator, from the Maybury family and Al Fahim Group. The Maybury family sold a 30% stake in the company in 2007 to the Al Fahim Group, a family investment fund from the United Arab Emirates.

Sofa Brands International, the furniture manufacturer behind brands including Parker Knoll, Duresta and G Plan, has been acquired in a management buyout backed by Promethean Investments.

Conviviality Retail plc, which owns Bargain Booze, has paid €8.5m to expand its convenience store portfolio after acquiring the GT News estate of 37 stores. The majority of these sites are based in the East Midlands and Yorkshire, with 13 operating under the Spar fascia. Conviviality Retail’s chief executive Diana Hunter said: “The acquisition of 37 stores from GT News is in line with our stated aim to grow our business into areas which are underserved by our brands.”