M&a round up april june 13 by Sutherland Global Services

US Retail M&A Review – Q2 2013 August 2013

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M&A deals in the US Retail declined further in Q2 2013 Announced US Retail M&A activity (Q2 2012- Q2 2013) 70

$45

66 62

$40

$40.8 $35

Deal Volume

$30

$25

$20 $15

$10

$6.2 10

$10.7

$2.1

Q3 2012

Q4 2012

Deal Value (US$ Bn)

$1.7

$5 $0

Q2 2012

Deal Volume

Q1 2013

Q2 2013

Disclosed Deal Value

Comments • Mergers and acquisitions (M&A) activity in terms of deal volume in the US retail industry recorded a new low in Q2 2013 as compared to the past four quarters of 2012 and 2013 • At an overall level, announced deal numbers decreased 6.7% from 45 in Q1 2013 to 42 in Q2 2013. Also, the disclosed deal value decreased massively from US$6.2 Bn in Q1 2013 to US$1.7 Bn in Q2 2013 • As always, M&A activity in the US Retail space was majorly focused on the food and beverages retailing. Moreover, Private Equity (PE) firms continued to show strong interest accounting for 35.7% of the total deals (volume) in Q2 2013 Source: Thomson Reuters

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Private Equity continue to find investment opportunities in the US retail Announced US Retail M&A activity by type (Q2 2012- Q2 2013) 70 60

$35 30.9

$25

33 34

Deal Volume

$20

40 $15 27

30 9.9

9.5

$10

4.2 1.1

1.1

2.0

1.0

Deal Value (US$ Bn)

$30

1.0

0.7

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Q2 2013

$0 -$5

PE Deal

Corporate Deal

Total PE Deal Value

Total Corporate Deal Value

Comments • PE firms have continued to play a central role in the US Retail M&A market and have been active deal participants in Q2 2013. In Q2 2013, PE activity in the retail sector comprised of 35.7% of deal volume and 57.6% of the deal value • In Q2 2013, PE backed deal volume decreased 16.7% quarter-on-quarter (q-o-q) to 15. Similarly, the disclosed deal value hosted a negative growth of 76.4% to reach US$ 1.0 Bn • On the other hand, the corporate deal volume remained stable in Q2 2013 to 27 but disclosed value decreased 64.3% to US$ 0.7 Bn • PE backed deals were more inclined toward food & beverage retailing and internet & catalog retailing during Q2 2013 Source: Thomson Reuters

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Food and beverage retailing continues to drive the US Retail M&A activity in Q2 2013 US Retail M&A activity by sub-sector: Q2 2013 Discount and Department Store Retailing Other Retailing Internet and Catalog Retailing Home Improvement Retailing Food & Beverage Retailing Computers & Electronics Retailing Apparel Retailing Deal Volume

US Retail M&A activity by sub-sector: Q1 2013 Discount and Department Store Retailing

3 $0.0 9

Other Retailing

$0.2 8 $0.0 2 $0.2 17

12 $1.8

Internet and Catalog Retailing

2 $0.0

Home Improvement Retailing

1 $0.0 19

Food & Beverage Retailing

$0.3 0 $0.0

0 $0.0

Computers & Electronics Retailing

3 $1.0

Apparel Retailing Deal Volume

Disclosed Deal Value (US$ Bn)

$3.7 2 $0.0 9 $0.7 Disclosed Deal Value (US$ Bn)

Comments • The US retail sector continues to be largely driven by food and beverage retailing transactions in terms of deal volume in Q2 2012, whereas apparel retailing drove the deal value in Q2 2013 • While the number of food and beverage deals decreased from 19 in Q1 2013 to 17 in Q2 2013, the total transaction value also decreased close to 91.3% q-o-q to US$ 0.3 Bn in Q2 2013 • Internet & catalog retailing saw an increase in M&A activity after a quite Q1 2013. Whereas, M&A activity in the apparel retailing recorded a significant drop from 9 deals in Q1 2013 to 3 deals in Q2 2013 Source: Thomson Reuters

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Key deals of Q2 2013 (1/2) Key deals of Q2 2013 Date

Acquirer

Target

Deal Value (US$ Mn)

23-May-13

Apax Partners LP

rue21 Inc

23-May-13

Bi-Lo Holdings LLC

17-Jun-13

Comments

Status

975.93

• Apax Partners LP, a wholly-owned unit of Apax Partners Worldwide LLP agreed to acquire the entire share capital of rue21 Inc, a Pennsylvania-based kids clothing retailer, from SKM Equity Fund II LP and other undisclosed shareholders, for a total value of US$ 1.0 Bn, in a leveraged buyout transaction. The acquisition will allow rue21 to deliver "substantial and certain value" as it looks to grow its store base and build out its e-commerce platform

Pending

Delhaize GroupStores(165)

265.00

• Bi-Lo Holdings LLC agreed to acquire 165 stores in the Sweetbay, Harveys and Reid's supermarket chains from Delhaize for US$ 265 Mn in cash. The acquisition is aimed to strengthen Bi-Lo and Winn-Dixie stores and allow them to extend their great products at great value to a broader customer base

Pending

Lowe's Cos Inc

Orchard Supply Hardware-Assets

205.00

• Lowe's Cos Inc entered into an asset purchase agreement with the bankrupt Orchard Supply Hardware Stores Corp, a San Jose-based owner and operator of home improvement centers, for US$ 205 Mn in cash and the assumption of liabilities, via auction. The acquisition will enable Lowe's to expand through a new store format and reach a new customer base in California with the addition of Orchard's smaller-format metro store locations

Pending

24-Jun-13

Cash America Pawn LP

TDP Superstores-Pawn Store (41)

102.50

• Cash America Pawn LP, a wholly-owned unit of Cash America International Inc entered in a asset purchase agreement for the acquisition of a 41 pawn lending store chains, Top Dollar Pawn owned by TDP Superstores Corp for an US$ 102.5 Mn in cash. The acquisition is aimed to further expand Cash America's pawn lending business in the State of Texas

Pending

25-Jun-13

First Cash Finl Services Inc

Valu + Pawn-Texas Chain

70.00

• First Cash Financial Services Inc acquired 19 large format US Pawn stores located in Texas, operating primarily under the Valu + Pawn brand, for US$ 70 Mn in cash. The acquisition provides First Cash Financial a new and meaningful presence in the large and growing Houston market, while expanding on their existing store base in the Dallas/Fort Worth area

Completed

5-Jun-13

GPM Investments LLC

VPS-Stores (263)

50.50

• GPM Investments LLC agreed to acquire 263 stores of the Southeast Division of VPS Convenience Store Group, for US$ 50.5 Mn. The transaction will give GPM a new and stronger presence in North Carolina, South Carolina, Tennessee and Virginia

Pending

Source: Thomson Reuters; Secondary Research

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Key deals of Q2 2013 (2/2) Key deals of Q2 2013 Deal Value (US$ Mn)

Date

Acquirer

Target

Comments

Status

8-May-13

YM Inc

Big M Inc-Mandee Fashion Chain

22.50

• YM Inc of Canada agreed to acquire the Mandee Fashion chain, including two other retail stores, from bankrupt Big M Inc, a Totowa-based owner and operator of retail women's apparel stores, for an US$ 22.5 Mn.The acquisition of Big M's 129 Mandee, Annie Sez, and Afaze stores will give YM Inc. a strong base to operate in the East Coast

Pending

20-Jun-13

NPC Quality Burgers Inc

Value Foods Co LLCWendy's

11.00

• NPC Quality Burgers Inc, a wholly-owned unit of the NPC International Inc, agreed to acquire the 13 Wendy's restaurants of Value Foods Co LLC, a Shawnee Mission-based owner and operator of fast food restaurants, for US$ 11 Mn. The acquisition is aimed to complete the NPC's pending acquisition of Wendy’s restaurants in the Kansas City metropolitan area

Pending

4-Jun-13

HRSH Acquisitions LLC

Alloy Merchandise LLC

6.80

• HRSH Acquisitions LLC, a special purpose vehicle formed by an investor group led by Steve Russo and Brian Lattman, acquired Alloy Merchandise LLC, a provider of ecommerce retail services, from dELiA*s Inc, for US$ 6.8 Mn.

Completed

23-Apr-13

SMG Growing Media Inc

AeroGrow International Inc

4.00

• SMG Growing Media Inc, a unit of The Scotts Miracle- Gro Co, agreed to acquire 2.65 Mn series B preferred shares convertible into 2.65 Mn or 44.9% common shares, of Aerogrow International Inc, a Boulder-based retailer, manufacturer and wholesaler of garden supplies, for US$ 4 Mn, in a privately negotiated transaction.

Pending

18-Apr-13

ProTek Capital Inc

Artfest International Inc

1.58

• ProTek Capital Inc agreed to acquire the entire share capital of Artfest International Inc, a Dallas-based publisher and wholesaler of paintings, in a stock swap transaction, valued at US$ 0.205 Mn. Protek offered 1 common share for each Artfest share. Based on ProTek's closing stock price of US$ 0.0002 on 17 April 2013, the last full trading day prior to the announcement, each Artfest share was valued at US$ 0.0002.

Pending

23-May-13

Clearlake Capital Group LP

Bluefly Inc

0.20

• An affiliate of Clearlake Capital Group LP acquired an 89% stake in Bluefly Inc, a New York-based leading online retailer of fashion forward designer brands, for a total value of US$ 0.204 Mn, in a leveraged buyout transaction

Completed

Source: Thomson Reuters; Secondary Research

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