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BFD Expert Voices - Retail Deals

BFD Expert Voices

The Federal Trade Commission showed its commitment to evolving the law on mergers when it came out against Tapestry's acquisition of Capri Holdings, experts tell Richard.

Why it matters: Changing how the courts think about antitrust is a yearslong process and involves taking on harder-to-argue cases.

What they're saying: FTC chair Lina Khan and Justice Department antitrust chief Jonathan Kanter "are definitely trying to push the limits of antitrust in an effort to expand what is considered to be illegal behavior," says Baker Botts partner Jeffrey Oliver.

These "new sheriffs" are trying to distinguish themselves from prior administrations, adds Oliver, a former FTC attorney.

Zoom in: The FTC may have been encouraged by its success in blocking the merger of JetBlue and Spirit, say Oliver and Brian Albrecht, chief economist at the International Center for Law & Economics.

Like those two airlines, Tapestry and Capri will argue a combination of the two struggling companies will create a viable rival to larger competitors.

In their case, that means European fashion conglomerates such as LVMH, Kering and Richemont.

Yes, but: While JetBlue and Spirit didn't succeed in making that argument, it's much easier for consumers to shop around for fashion, Oliver says.

There are not high barriers to entry for the fashion and accessories marketplaces and bargains can be found everywhere, namely online, he says.

It's why the FTC has historically "leaned out of" challenging these kinds of deals and why it's risky to do so now, Oliver adds.

The intrigue: It's rare that the U.S. is not in lock step with its antitrust counterparts in the European Union and Japan, which both cleared the deal, say Oliver and Albrecht.

There's been a level of collegiality between antitrust enforcement around the world in recent years not previously seen, Oliver says.

The latest: The FTC also moved to ban noncompete agreements last week, another sign the agency is now weighing the impact on workers in addition to consumer welfare when it comes to mergers.

The FTC argued, for example, that a combined Tapestry and Capri would not be incentivized to compete for employees.

In this instance, the point felt tacked on or added at the last minute, because the FTC did not provide as much analysis on the negative labor implications compared to other lawsuits it has filed, Oliver observes.

The bottom line: Like JetBlue-Spirit and Kroger-Albertsons, this will be another battle over market definition, Albrecht says.

1 big thing: FTC plays long game opposing Tapestry-Capri

Illustration of a chess piece with a gavel top

Martie, a startup selling overstock of shelf-stable food products online, is raising a $3 million to $4 million extension, CEO Louise Fritjofsson tells Richard exclusively.

Why it's the BFD: The company aims to save products from landfill and sell discounted healthier food so it can be accessed by lower-income families.

Catch up quick: Martie has already raised a total of $6.5 million via a pre-seed in 2021 and a seed in 2022.

By the numbers: Its revenue run rate is north of $10 million, it has grown 25% month over month since September, and it expects to grow revenue 8x this year compared to last, Fritjofsson says.

The extension should fund the company until it reaches profitability, which it is approaching this year, she says.

Zoom in: Martie can offer organic and natural food for 50% less than what is charged at a typical grocer.

And because the products are shelf stable and delivery time is flexible (between three and five days), it can operate profitably.

What's next: The company is expanding the number of SKUs it offers from 500 to 1,000.

It plans to add a second warehouse either on the East Coast or West Coast by the end of this year in addition to the one in Texas.

Martie is updating its app with entertainment, sweepstakes, and live shopping videos.

And it is launching a membership program that offers cash back and free shipping.

The big picture: Closeouts is a huge market, Fritjofsson says, pointing to the likes of T.J. Maxx.

State of play: Martie considers Hungryroot, DeliverLean, and food-as-medicine providers as competitors.

2. The BFD: Food overstock retailer Martie raising extension

🥣 General Mills (NYSE: GIS) hired JPMorgan to find a buyer for its North American yogurt unit, including the Yoplait brand in a deal that could be worth more than $2 billion, according to Reuters.

The company, like other CPG conglomerates, is paring its non-core assets to focus on core ones. The company has already shed its European unit of Yoplait back in 2021.

Yogurt is a hot area for dealmaking. Campbell Soup (NYSE: CPB) is seeking to divest its Noosa Yogurt unit and Danone sold its Wallaby yogurt and Horizon milk brands to Platinum Equity last year.

JPMorgan and General Mills declined to comment.

🧴 L'Occitane owner Reinold Geiger is nearing a deal to acquire the shares he doesn't already own for HK$33 to HK$34 apiece, per Bloomberg, citing sources.

He will work with Blackstone and Goldman Sachs Asset Management for financing on the buyout deal, which is valued at about $7 billion inclusive of debt.

💄 Puig Brands SA, the Spanish beauty and fragrance group, expects to set its IPO price at €24.50 per share, at the high end of its range, giving the company a valuation of around €13.9 billion, according to Bloomberg.

The IPO markets have woken up in Europe with the recent debuts of Swiss skin care company Galderma Group's IPO in Zurich and private equity firm CVC Capital Partners' IPO in Amsterdam.

❌ Getir, the Turkish delivery company, plans to withdraw from its remaining European and U.S. markets to focus on home, the company said.

The company was valued at $12 billion two years ago and had operations in Western Europe, New York and Chicago.

Getir, which is reportedly seeking to secure asset sales, received new financing from Mubadala and G Squared, it said, which would go toward fortifying its business in Turkey.  

3. Retail therapy

Illustration of two speech bubbles in the shape of shopping bags.

Want more retail deals? Go deeper into our full database in the Axios Pro Deals Tracker.

Markt-Pilot, a German-based after-market parts software provider for manufacturers, has raised a $43m Series A led by Insight Partners, with participation from Capnamic. https://axios.link/4bfIYG9

• L Catterton agreed to acquire a majority stake in Italian beauty brand and retailer Kiko. axios.link/3QHYzXp

• Shoreline Equity Partners invested in Prime Meats, a Jacksonville, Florida-based protein processor and distributor. primemeats.com

• SkinSpirit, a group of medical aesthetics clinics across the U.S., acquired Skintology MedSpa in Tribeca, New York. skinspirit.com/

• CVC Capital Partners priced its IPO at €14 per share (within €13-15 range) and then saw shares rise more than 20% in its Amsterdam debut.

• Super Hi International (HK: 9658), a Hong Kong-based operator of hot pot restaurants doing business under the Haidilao brand, filed for a $100m float on the Nasdaq (HDL). axios.link/4aTLSAz

4. Retail transactions

• Chester Brandes, Jonathan Bonchick, and Johnny Manuel have joined the board of spirits incubator Wes Brands. wesbrandsllc.com/

5. It's Personnel

📍 Axios is heading to Los Angeles on May 5, during the week of the Milken Institute Global Conference, where we'll host an event featuring an interview with business editor Dan Primack and WndrCo. founding partner Jeffrey Katzenberg. Request an invite to attend here.

🍽️ What we're eating: Kim had a croque madame and French onion soup at La Grande Boucherie and took a stroll in Central Park over the weekend.

✏️ Many thanks to newsletter editor Claire Rychlewski and copy editor Mickey Meece for today's edits.

April 29, 2024

1 big thing: FTC plays long game opposing Tapestry-Capri