Sunday Times

‘Dis­ap­point­ing’ in­vest­ment Busby sold in com­plex trans­ac­tion

- By ADELE SHEVEL Business · Consumer Goods · Investing · Belgium · The House of Chanel · Dolce & Gabbana · Dermalogica Inc. · Woolworths Limited · Aldo Group Inc. · Guess · Steve Madden · Steve Madden · Bulgari SpA · Truworths

● 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”.

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