‘Disappointing’ investment Busby sold in complex transaction

● House of Busby, the retailer that has exclusive distribution rights for global brands such as Aldo, Guess and Steve Madden, has been sold to Cavico, a privately held company that has distribution rights in SA for prominent beauty brands.

Busby has been constrained by debt and hobbled by long-standing squabbles among shareholders. Much like Edcon, Busby was previously bought by a private equity company in a highly geared deal and delisted in what was soon to become a tough market.

Ethos Fund V bought Busby in 2008 and held the investment until the sale to Cavico, longer than a private equity firm typically holds a business. Ultimately, the investment was “disappointing” for Ethos, said Chelsea Wilkinson, head of corporate relations at Ethos.

It is not clear how much Ethos lost on its investment, but it is believed to be a substantial amount.

Initial owners Keith and David Brouze had been embroiled in arbitration over “misrepresentation” with previous shareholders. An insider said the Brouzes never saw eye to eye with majority owners Ethos. Ethos owned the business but the brothers carried on as if they did, he said. Among the issues were differing views on bringing Top Shop to SA.

Cavico was started in 2005 as a distributor of fragrances and skincare products and now has about 40 brands within its domain including distribution rights to iconic brands such as Chanel, Hermes, Bulgari, Dolce & Gabbana, as well as skincare brand Dermalogica. It also owns brands in the fast-moving consumer goods sector such as Everysun, Tropitone and Miltons.

The sale was concluded this month for an undisclosed amount, after initial interest was expressed at the end of last year.

Cavico’s turnover stands at about R1bn, while Busby’s is about R2bn.

Mark Sardi, Busby’s CEO, said it was a complex transaction involving several stakeholders (licence partners, shareholders, banks, landlords and bondholders) and the objective was to preserve a good business with a bad balance sheet in a tough market.

“If it had not been for the strong co-ordination between lenders, new equity holders and previous shareholders this wouldn’t have happened.”

Cavico’s brands are sold in Woolworths, Edcon and Truworths as well as in pharmacies such as Dis-Chem and Clicks, and supermarkets such as Pick n Pay and Shoprite Checkers.

Dermalogica has 12 of its own salons. The group also trains 8,000-10,000 spa or salon professional therapists and operators a year.

Cavico now owns 65% of Busby, with institutions, management and minority shareholders owning the rest. CEO Michael ten Hope said the intention was to “restart Busby’s investment plan, rebuild the organisation’s retail skill set by recruiting aggressively, and build stronger partnerships with our brand principals”.