Grays Online acquires online retailer oo.com.au for scale and to reach A$350m in sales

30th April 2013. Grays Australia has acquired the retail website www.oo.com.au from Johannesburg, South Africa-listed Nu-World Holdings (JSE:NWU) and also and its current and former staff. Terms have not been disclosed.

The scale of the company will allow Grays to continue to offer the best value to Australian and New Zealand customers. By adding A$50m revenue, the deal will make Grays one of the largest eCommerce business in Australia with over A$350 million in sales, and a customer database of over three million people.

The acquisition follows an investment of A$35m in January 2011 for a 25% stake by Caledonia Investments, at a reported 13 times 2011 earnings, and billed at the time as leading to an IPO of the company. According to the Australian Financial Review, the company reported a $1.6 million after profit tax for the 2012 financial year, almost half of what it reported in 2011. The fall was attributed to a wine glut, the sharp increase in the Australian dollar and weak consumer confidence. Grays CEO Cameron Poolman told the AFR the company was on track to have an improved 2013.

Gray Australia, which comprises of Graysonline.com, Graysoutlet.com and Graysescape.com, has acquired the OO brand, website, the “buy now” customer database and staff expertise. The future plans are for the retention of the OO brand, expansion of range within existing categories as well as the introduction of new categories and additional investment in the website. The OO warehousing and staff will relocate from their 9000sqm Rosebery site to Grays 30,000sqm headquarters at Homebush over the next 3-6 months and Rolf Krecklenberg, the current CEO will continue to manage the OO business.

“Both businesses have been leaders in the online retail space for over nine years, and have profitably operated on proven business models. The incremental $50m from OO will take Grays company turnover to more than $350 million, making it a major retailer in the Australian market place. Importantly, the extra scale provided by this acquisition will ensure our ongoing profitability using a sustainable business model.” explained Cameron Poolman, CEO for Grays.

“In terms of pure play retailers, we had it to ourselves for a while,” said Cameron Poolman, Grays CEO, in an interview with Channel News, “but traditional retailers (Myer, David Jones & Co) are now going online”, all screaming about multi or onmi channel strategies, and going hard on e-commerce. Not every consumer likes auction sites, such as Grays Online and eBay. The acquisition allows Grays which is “synonymous with discounts” to branch into mainstream retail with a fixed price site. In addition, there are significant costs associated with running these businesses. Rolf [Recklenberg, OO CEO] and I had been talking for some time. The purchase gives us the scale we were looking for.”

Other local online retailers such as The Iconic and DealsDirect which have been raising equity in an effort to increase scale and profitability. Online shoe-seller StyleTread was acquired by a successful Melbourne “bricks and mortar” footwear wholesaler and retailer, the Munro family, in February 2013.

Industry figures suggest that the online retail market will continue to grow strongly over the next five years and Grays wants to be in a strong position to capitalise on this growth. Customers will now have a wider range of products to choose from and Grays will continue to ensure they receive the best prices. Business efficiencies and website enhancements will also provide customers with a better overall shopping experience.

“Australia’s online scene will soon be like the US” Grays CEO predicts, with the big retailers accounting for 80% of the market, while pure play etailers like Grays taking the remainder. He sees big growth for the traditional retailers and more consolidation for other online businesses maturing and declining.

Poolman also said the acquisition provides very little crossover between the two sites in terms of consumer demographics. Also, OO also provides Grays suppliers with another channel for its products. Grays consumers are a little older and are skewed towards males, and “two thirds of our sales are business products like mining equipment and cars and transport. OO’s core demographic, is more the younger, bargain hungry consumers looking to buy the latest electronics and other gear.

“This is a wonderful opportunity for OO staff and our customers to join the Grays group. I am looking forward to expanding our range, entering new categories and leveraging the Grays infrastructure so that we can offer our customers even better value. We have an exciting future ahead and we look forward toremaining at the forefront of online retail in Australia.” Said Rolf Krecklenberg.

About Grays Australia
GraysOnline is an Australian online retail and auction company established in 1988, offering a huge range of consumer, industrial and commercial goods direct from manufacturers and distributors.
GraysOnline was founded in 2000, and is perhaps most well-known for its wine auctions. After a management buy-out in 2005, the company refocused its online operations. In 2011 the business sold a 25% stake to Caledonia Investments for A$35m at a valuation in the order of 13 times 2011 earnings.
Consumers and businesses can buy quality branded products across more than 80 categories, from wine, jewellery, home & garden, and computers & electronics to cars, forklifts, trucks and mining equipment. GraysOnline sell more than 120,000 items every month via auction and fixed price format. They offers consumers a convenient way to buy quality products at discount prices while providing vendors with an efficient channel to sell excess and superseded stock.

About oo.com.au
oo.com.au (“only online”) have been in online retail since January 2002. It moved to being only online in 2004.
oo.com.au is operated by Overstockoutlet Pty Ltd. was founded in 2002 and is based in Alexandria, Australia. Overstockoutlet Pty Ltd was formerly known as Global Regency Electronics Pty Ltd.
As of 1st July 2008, 51% of Overstockoutlet Pty Ltd. was acquired by Yale Prima Pty. Ltd, which is owned 59.4% by listed South African firm Nu-World Holdings Limited (JSE:NWU). The net cash consideration paid at the time was 38,471,000 Rand (approximately A$5.77m).
oo.com.au has over 30,000 products, from a range of top international and local brands, all at low prices, including consumer electronics, watches, perfumes, books, DVD’s, golf, health and fitness equipment, luggage, manchester, and fashion accessories.
When shopping at oo.com.au customers save up to 80% off retail prices on quality branded products in over 30 Department Store categories. oo.com.au offer a No Questions Asked Money Back Guarantee, and Low Price Guarantee which ensures the customer always pays the lowest prices even after the purchase, full warranties and transit insurance, oo.com.au provides local customer service over email or telephone, and customers can even earn Velocity Points on every item purchased.

Posted in M&A - Austr - S/W & Services, PE Investments - Aus and tagged , , , , , , , , .