Due diligence for the deal is said to be in advanced stages. If the deal goes through, Reliance Retail plans to increase the geographic footprint of Hamleys in India.
Hamleys, the iconic British toy retailer which has been around since the time the East India Company established its foothold in the country, could soon fall into Indian hands. If talks with the Chinese owner succeed, the 259-year-old brand will end up being the plaything of Reliance Retail, India’s largest retailer, multiple sources involved in the negotiations told Moneycontrol News.
The purchase of Hamleys, which has its flagship store on London’s Regent Street, will illustrate the growing international ambition of Reliance Retail, which has a target of growing at 30% every year for a decade.
Reliance Retail is owned by Reliance Industries Ltd, India’s largest company by market value. The Network 18 group, the publisher of Moneycontrol, is controlled by RIL
"Due diligence for the deal is at an advanced stage," said one of the sources cited above, adding, "Reliance Retail is aggressively pursuing the deal."
Hamleys, which began life as ‘Noah’s Ark in London in 1760, counts the royal family of Saudi Arabia among its loyal customers. In recent years, though, it has been struggling due to uncertainty over Brexit and softening UK consumer confidence. It reported a loss of 12 million pounds in 2017 and a 2.5 percent decline in annual revenues to 66.3 million pounds. However, it is still a dominant player in the $11 billion worldwide toy industry even as rivals like Target, Walmart, Amazon and Kohl’s are snapping at its heels.
A source said the acquisition, if successful, will help expand Reliance Retail’s portfolio. “Reliance (Retail) can scale up Hamley’s business with its capabilities in supply chain management and strong distribution network.”
Responding to an e-mail query from Moneycontrol, a Reliance Industries spokesperson said, "As a policy, we do not comment on media speculation and rumours. Our company evaluates various opportunities on an ongoing basis. We have made and will continue to make necessary disclosures in compliance with our obligations under SEBI regulations and our agreements with the stock exchanges."
Moneycontrol is awaiting an email response from C. Banner International, the promoter of Hamleys, and will update this article as soon as it gets it.
Reliance Retail already has a pan-India franchise agreement with Hamleys to merchandise its famous toys. Hamleys has around 129 stores globally, a large majority of which are under the franchise model and outside the United Kingdom, the company is present in China, Germany, Russia, India, South Africa, the Middle East and other regions.
If the deal goes through, Reliance Retail plans to increase the geographic footprint of Hamleys in India.
"Hamleys currently has around 50 stories in India, the plan is to ramp it up to 200 over the next three years," said another source familiar with the deal.
Moneycontrol could not independently verify if there were other bidders as well for Hamley’s.
According to a report by market research firm IMARC, the Indian toy market was worth $1.5 billion in 2018, and has grown 15.9 percent compounded annually, between 2011 and 2018. IMARC expects the market size to cross $3.3 billion by 2024, driven by a huge base of young population, and strong economic growth. The report lists Funskool, Lego, Mattel and Hasbro as the main players in the Indian toy market.
Chinese fashion conglomerate C. Banner International had acquired Hamleys for £100 million in cash in 2015. Last year in October, C Banner started looking out for potential buyers for the toy maker, according to a Sky News report. Corporate finance firm Vermillion Partners was hired to negotiate with bidders, the report said.
If the deal with Reliance Retail goes through, it would be the fourth time Hamleys has changed hands since it was taken private by an Icelandic investor in 2003.
Reliance Retail has entered into tie-ups with many other marque international brands such as Diesel, Marks & Spencers, Steve Madden and Kenneth Cole. It reported a turnover of Rs 69,198 crore for the financial year 2017-18. As on 31st December 2018, Reliance Retail operated 9,907 stores across 6400+cities with a retail area of over 21 million square feet. Earlier in January 2019, global brokerage house CLSA said the organised and combined online and the offline retail market may grow ninefold to $550 billion in 10 years and RIL's pure retail revenues may rise nearly 12-fold to $138 billion in the same period.
Source: https:// www.moneycontrol.com/news/business/companies/in-play-reliance-retail-in-talks-to-buy-out-259-year-old-british-toymaker-hamleys-3842321.html
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