JUVENILE PRODUCTS Q3 2014 - Capstone Partners

JUVENILE PRODUCTSCONTACTSSophea ChauVice President(617) 619-3307schau@capstonellc.comJohn FerraraFounder & President(617) 619-3325jferrara@capstonellc.comJacob VoorheesManaging Director(617) 619-3323jvoorhees@capstonellc.comQ3 2014MERGER & ACQUISITION ACTIVITYMergers and acquisitions in the juvenile products industry are continuing at an elevated level,fueled by improved economic conditions and increased consumer spending. M&A activity wasvery strong in 2013, during which 36 transactions were closed in the industry. Activity in thesector has remained robust in 2014, with 21 transactions reported year-to-date.M&A activity in the industry has primarily been motivated by buyers looking to add new productsand proven brands to their offerings. The juvenile products industry is highly fragmented, withmany companies producing a single or limited number of products. In addition to enhancingtheir product line-up, buyers are also using acquisitions to gain advanced marketing capabilitiesand expanded distribution channels. Global expansion has also played a key role in M&A activityin the industry, with several corporate buyers seeking acquisitions to gain access to certainchannels and brands.Private equity buyers have also been very active in the sector. Having already made platformacquisitions in the industry, many of these private equity firms are now making add-onacquisitions. This “buy and build” strategy allows private equity firms to fast-track the growth oftheir holdings.The positive outlook for the juvenile products industry is expected to continue to drive M&Aactivity in the near-term.M&A Activity: Juvenile Products40363530262325BOSTONCHICAGOLONDONLOS ANGELESPHILADELPHIASAN DIEGOSILICON 01220132014 YTDSources: Capital IQ; Capstone Partners LLC ResearchYTD through July 31, 2014

Juvenile ProductsQ3 2014SELECTED DEAL BRIEFSA review of recent transactions shows a variety of businesses sold in the juvenileproducts industry in recent months. Selected transactions are outlined below,followed by a more comprehensive list of transactions in the following table.Kid Brands Files for Bankruptcy; Selling Subsidiaries (July 2014) – Kid Brands filedfor Chapter 11 bankruptcy in June and announced plans to sell its subsidiaries. InJuly, Crown Crafts Inc. agreed to acquire the Kidsline and CoCaLo brand names andassociated trademarks for 1.4 million. No physical assets are included in theacquisition. Kidsline and CoCaLo manufacture and distribute infant bedding androom décor accessories. Also in July, Sassy 14, LLC, an entity controlled by theformer president of Sassy, entered into an asset purchase agreement to acquireSassy, Inc. from Kid Brands for 14 million in cash. Sassy, Inc. manufactures anddistributes infant toys and other baby and toddler products in the United States andinternationally. Completion of the transactions are subject to the approval of theUnited States Bankruptcy court as part of the Chapter 11 bankruptcy proceedings.Dorel Industries Inc. acquires the Juvenile Business of Lerado Group (June 2014) –Dorel announced that it has agreed to purchase the Juvenile Business of LeradoGroup, one of the largest manufacturers of juvenile products in China, forapproximately 120 million. The acquisition, which includes four facilities in Asia(three in China and one in Taiwan), including significant R&D facilities, will provideDorel with its first company-owned factories in Asia. The Juvenile Business had salesand EBITDA of 176 million and 13 million, respectively, in 2013, whichrepresents a multiple of 9.2x EBITDA. The transaction is expected to close in Q42014.Goodbaby International acquires Evenflo Company Inc. (June 2014) – Evenflo is oneof the world’s most recognized providers of baby care and juvenile products. Itscomprehensive product portfolio includes car seats, travel systems, high chairs,carriers, activity centers, doorway jumpers and juvenile gates. Hong Kong-basedGoodbaby International acquired Evenflo in order to reinforce its leadership status inthe global juvenile products market and expand its marketing and distributioncapabilities. Mr. Song Zhenghuan, Chairman and CEO of Goodbaby International,commented, “We are delighted to welcome Evenflo into Goodbaby’s portfolio ofbrands. We believe the addition of Evenflo will augment the Group’s productoffering, and provide a strong platform for the Group in the overseas markets.” Theacquisition, valued at 143 million, represents a key step in Goodbaby’s strategy toupgrade its global business model in the international market. This deal comes onthe heels of Goodbaby’s acquisition of European-based juvenile productsmanufacturer Cybex, which merged with Goodbaby earlier this year.Propel Equity Partners acquires the assets of Summit Products (May 2014) – PropelEquity Partners, a private equity firm focused on investing in leading consumerbrands, acquired the assets of Summit Products, a manufacturer of children's toys.The assets include Backyard Safari, Zillionz, Covert Force and Stink Bugzzz and will beincorporated into the Alex Brands family of leading toy brands. Propel acquired AlexBrands in May 2013.Capstone Partners LLC 2

Juvenile ProductsQ3 2014SELECTED DEAL BRIEFS (CONTINUED)University Games acquires the assets of Briarpatch Inc. (March 2014) – Briarpatch isa leading manufacturer of preschool specialty games and puzzles. With thisacquisition, University Games will now have one of the largest selections of preschoolgames and an expanded collection of licensed literary games. Bob Moog, Presidentof University Games, commented, “Briarpatch is the leader in pre-school specialtygames and has been for the last 20 years.” Briarpatch is the ninth acquisition since1994 for University Games.Mattel Inc. acquires MEGA Brands (February 2014) – MEGA Brands Inc. is a trustedfamily of leading global brands in construction toys, games and puzzles, and arts andcrafts. This acquisition represents one of the key avenues for achieving Mattel’sglobal growth strategy by entering strategic categories that can benefit from thebrands, distribution reach and marketing strength of the world’s largest toy maker.Bryan Stockton, Mattel Chairman and CEO, stated, “We are pleased to welcomeMEGA Brands into the Mattel family of companies and believe the opportunities forglobal expansion and product innovation created by this acquisition will be one of thekey drivers of our global growth strategy in 2014 and beyond.” The transaction wasvalued at 432.2 million.Dorel Industries Inc. acquires Tiny Love Ltd. (January 2014) – Tiny Love is an awardwinning baby products and developmental toy company headquartered in Tel Aviv,Israel, with offices located in the U.S. and China. Dorel acquired Tiny Love for itspremier brand name, quality reputation and strong distribution networks in diversegeographic markets. Dorel President and CEO, Martin Schwartz, stated, “We aredelighted to be acquiring Tiny Love, a proven and well-known juvenile productscompany within our industry. They have growing brand recognition that issynonymous with child developmental excellence. With their strong distributionnetwork in diverse markets, this latest investment further solidifies our position as aglobal leader in the juvenile industry and expands the geographies in which weoperate. Tiny Love is particularly strong in Eastern Europe which is an important partof our growth strategy.” Capstone Partners advised Tiny Love Ltd. on its acquisitionby Dorel Industries, Inc.Munchkin Inc. acquires BRICA (January 2014) – Munchkin, a leading designer andmanufacturer of infant and toddler products, purchased BRICA, a leading innovatorof auto, home and travel products for babies and parents. The acquisition addsBRICA's strong travel portfolio, including auto sunshades and mirrors, to a Munchkin product portfolio that includes infant categories such as bath care, safety, travel andfeeding. Steven Dunn, CEO of Munchkin, said "Combining the Munchkin and BRICAtravel portfolios creates a category-leading statement, enabling us the opportunity towork with our key customers to fuel overall category and market share growth.“BRICA is a privately held company with an established brand with robust distributionand a loyal customer base. BRICA's current portfolio includes more than 50 uniqueitems. With the #1 market share position in travel accessories, BRICA has recentlyalso expanded into new categories including stroller accessories, in-homeaccessories, bath products and nursery accessories. Joining Munchkin allows BRICAthe scale and resources to accelerate its growth, while increasing its development ofnew products.Capstone Partners LLC 3

Juvenile ProductsQ3 2014SELECTED JUVENILE PRODUCTS M&A TRANSACTIONSDateTargetBuyerTarget Business Description07/28/14Sassy, Inc.(Kid Brands)Sassy 14, LLCManufactures and distributes toys and other infant and toddler products inthe United States and internationally.07/24/14Kidsline and CoCaLo(Kid Brands)Crown Crafts, Inc.Manufactures and distributes infant bedding and room décor accessoryproducts.07/17/14Citrus Lane, Inc.Care.com, Inc.Operates an e-commerce website that helps parents to discover baby productsand share information.06/16/14Lerado Group,Juvenile BusinessDorel Industries, Inc.One of the largest manufacturers of juvenile products in China.06/06/14Evenflo Company Inc.Goodbaby InternationalManufactures infant and toddler car seats, gates and bathing products.5/30/14PlayCore, Inc.Sentinel Capital PartnersManufactures and markets educational play and recreation products.06/06/14Itzbeen Innovated, Inc.SCS Direct Inc.Manufactures baby care timers for parents.05/19/14Summit Products, LLCPropel Equity PartnersDesigns, develops and sells toys for children.05/19/14Citiblocs LLCPropel Equity PartnersManufactures and designs wooden constructions blocks for children.05/16/14Stella JackMoxie JeanOperates as an online seller of children’s clothing.05/05/14PublicationsInternational LTDPhoenix Media FundPublishes educational products and books for children.05/02/14Infantly Available, Inc.Individual InvestorDevelops and distributes an organic clothing line designed for children inCanada.03/12/14BRIARPATCH, Inc.University GamesCorporationManufactures fun and educational toys for children.02/28/14MEGA Brands Inc.Mattel, Inc.Manufactures, designs and markets various toys, stationary and activityproducts for kids.02/25/14Uncle MiltonIndustries, Inc.KCB ManagementManufactures and markets educational toys for children.02/19/14Digital PlaySpace Inc.3D Systems CorpDevelops and designs games for kids.01/29/14Duane Street Corp.CUR Media, Inc.Manufactures and markets baby calming products.01/14/14Babbaco LLCBarefoot Books, Inc.Manufactures baby products, including infant car seat covers, self-inflatingplay mats, burpies and tees.01/14/14Tiny Love Ltd.Dorel Industries, Inc.Manufactures baby products and developmental toys.01/07/14Aden AnaisSwander Pace CapitalManufactures baby wraps, swaddling blankets, hooded bath towels andwashcloths for newborn babies in the United States.01/07/14Brica Inc.Munchkin, Inc.Manufactures safety products for kids travelling in a car.Transaction highlighted in blue was completed by Capstone Partners.Sources: Capstone Partners LLC Research, Capital IQ, company public filings and press releases.Capstone Partners LLC 4