FINANCE

PwC: Grocery, drug, discount and mass M&A deal volume up third year in a row

BY Marianne Wilson

New York — Retail and consumer (R&C) total transaction value in the United States for 2013 surpassed $100 billion for the first time since 2008, according to PwC’s US retail and consumer deals insights 2013 Year in Review and 2014 Outlook report. Deals in the food and beverage sector and private equity (PE) investment in the apparel, footwear and accessories sector continued to drive activity in the R&C industry.

The report finds that transaction value for announced deals with values greater than $50 million was $107 billion, up 32% from $81 billion in 2012 – and this five-year high was due largely to the $28 billion Berkshire Hathaway/3G and Heinz mega deal.

Deal volume for announced transactions with values greater than $50 million declined slightly, by 2%, to 126 deals in 2013, partially due to the abnormally higher deal volume during fourth quarter 2012 when many deals were pulled forward prior to the fiscal cliff and tax rate changes.

“Although total retail and consumer deal volume fell during 2013, the sector represented about 12% of total U.S. deal volume for the year – and R&C deal value increased to a five-year high,” said Leanne Sardiga, partner and PwC’s US retail & consumer deals leader. “At PwC, we’re tracking five macroeconomic megatrends that are shaping the world and economy that have implications on M&A strategy. They consist of accelerating urbanization, demographic shifts, climate change and resource scarcity, shifts in global economic power and technological breakthroughs.”

The retail and consumer sector continues to be largely driven by food and beverage transactions both in terms of deal volume and deal value, according to the study. For announced deals with values greater than $50 million, food and beverage transactions accounted for 24% of R&C transactions in 2013.

Grocery, drug, discount and mass deal volume for transactions greater than $50 million continued to grow for the third year in a row, reaching 15 deals in 2013 compared to 13 deals in 2012 and five deals in 2011.

Restaurant deal volume for transactions greater than $50 million continued to decline for the third year in a row, plunging to three deals in 2013 compared to 10 deals in 2012 and 13 deals in 2011. This led restaurant deal volume as a percentage of R&C deal volume to decrease to 2% in 2013 from 12% in 2011.

Private equity continued to play a pivotal role in the apparel, footwear and accessories subsector accounting for 53% of transactions with values greater than $50 million.

“All signs point to positive momentum for R&C deals outlook for 2014, but a number of factors will impact the market,” added Sardiga. “Continued cross border activity as companies invest in emerging markets to bolster stagnant organic growth at home will be a factor. Another will be PE investors in the retail and restaurant sector, in addition to companies expanding their omnichannel capabilities to increase their competitiveness. Consumers will remain cautiously optimistic in 2014 as home value improvement continues and economic headwinds retract. And the potential limited availability of high-quality assets for sale despite buyer appetite will be another factor. All of this emphasizes the underlying importance for companies to have a disciplined M&A process in today’s competitive deal environment.”

The report notes that IPO volume and proceeds improved significantly from 2012, with total R&C proceeds having reached $10.3 billion in 2013, representing a 220 percent increase over the prior year. Overall, the year saw 29 IPOs compared to 22 in 2012. The improvement, according to PwC, was largely due to the increasing investor appetite for growth companies, low volatility, and strong equity markets in fourth quarter 2013.

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FINANCE

Report: Bebe considering sale

BY Dan Berthiaume

Brisbane, Calif. – Bebe Stores Inc. is reportedly considering selling the business. According to Reuters, an anonymous source with inside knowledge said Bebe has hired Guggenheim Securities to help evaluate a possible sale.

Neither Bebe nor Guggenheim commented on the article. Bebe has experienced some recent financial disappointment. During the second quarter of fiscal 2014, Bebe reported a net loss of $5.5 million. Net sales declined 4.1% to $130 million, from $135.5 million reported for the second quarter a year earlier and same-store sales decreased 1.9%. Bebe expects flat same-store sales for the third quarter of fiscal 2014.

For the remainder of fiscal year 2014, the company plans to close up to six Bebe stores and one 2b Bebe store, which will result in approximately an 8% decrease i6 total store square footage from the end of fiscal year 2013.

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Jones Group net loss, net sales fall

BY Dan Berthiaume

New York – The Jones Group Inc. reported mixed results for the fourth quarter and fiscal year 2013, with net loss and net sales falling in both periods compared to the same periods a year earlier. Net loss fell to $47.1 million from $80.1 million during the fourth quarter, and to $19.7 million from $55 million during the full year.

However, net sales declined 8.5% to $876.5 million from $958.3 million during the quarter, and fractionally to $3.72 billion from $3.75 billion during the full year.

John T. McClain, CEO of Jones Group, said the company is taking actions to enhance profitability and focus on its core brands.

"Our financial position remains strong,” said McClain. “We ended the year with $116 million in cash and our revolver undrawn. We are continuing to focus on inventory management, expense control, and operational efficiencies and believe we will continue to improve margins and maintain a strong balance sheet."

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