After filing for bankruptcy protection about five months ago, Franchise Group is selling the Vitamin Shoppe chain to two private equity firms that plan to invest in the retailer and upgrade its roughly 650-store fleet.
Kingswood Capital Management and Performance Investment Partners said they entered into a definitive agreement to acquire the Vitamin Shoppe, based in Secaucus, New Jersey, from Franchise Group. Terms of the deal, which is expected to close in the second quarter, weren't disclosed, though Bloomberg Law reported that the purchase price is $193.5 million.
The Vitamin Shoppe is a pure-play omnichannel retailer of vitamins, nutritional supplements, minerals, sports nutrition, specialty supplements, herbs and homeopathic remedies. It carries products from roughly 700 national brands as well as proprietary brands, including the Vitamin Shoppe, BodyTech and True Athlete.
Kingswood Capital and Performance Investment, both based in Los Angeles, are the latest in a series of private equity firms buying retail chains, promising to give them capital to expand, make improvements to their brick-and-mortar locations and lend their expertise to drive sales.
Private equity moves in
In November, deep-pocketed giant Blackstone said it had reached an agreement to acquire a majority stake in Jersey Mike’s Subs, the fast-casual chain that touts its freshly prepared sandwiches, for a reported $8 billion. Also last year, private equity firm Roark Capital closed a deal to buy another huge sandwich chain, Subway. That was reportedly a $9.6 billion deal.
Meanwhile, in early March, drugstore chain Walgreens Boots Alliance announced it planned to go private in a $10 billion buyout deal with Sycamore Partners in order to drive its turnaround effort. Later that month, discount giant Dollar Tree said it had a deal to sell its struggling Family Dollar chain for roughly $1 billion to Brigade Capital Management and Macellum Capital Management, activist private equity firms that unsuccessfully tried to take department store retailer Macy's private.
Meanwhile, Vitamin Shoppe's proposed new private equity owners plan to invest in the retailer and its real estate.
"We plan to make significant investments in the company’s third-party brand relationships, research and development across The Vitamin Shoppe’s owned proprietary brand portfolio, upgrades to the store fleet, and improvements to the omni-channel digital platform to deliver the best possible experience to customers," Kingswood partner Michael Niegsch and Performance Investment partner Mark Genender said in a joint statement on Wednesday.
Emerging and growing companies will also be given the chance to partner with the Vitamin Shoppe and "benefit from access to over 650 retail doors and The Vitamin Shoppe’s millions of loyalty members at a time in history when it is more important than ever for these brands to demonstrate success and traction in physical retail as well as online,” according to Niegsch and Genender.
Kingswood's portfolio includes holdings in retailers such as Mountain Equipment Co., World Market and Save Mart Cos.
A Chapter 11 saga
Delaware, Ohio-based Franchise Group filed for voluntary Chapter 11 in early November, one of a number of retail owners that sought bankruptcy protection in recent months and last year. At the time, it said it planned to close its American Freight chain with 357 stores. In addition to that retailer and the Vitamin Shoppe, Franchise Group owns Pet Supplies Plus and Buddy's Home Furnishings.
In its bankruptcy filing, Franchise Group cited the same kinds of financial problems from macroeconomic trends that other retail owners have had, particularly furniture sellers: a spike in sales during the pandemic followed by a slowdown in nondiscretionary spending when stimulus money ran out and inflation soared.
For the record
Jefferies is serving as exclusive financial adviser to Kingswood and Performance Investment. McDermott Will & Emery and Sidley Austin LLP are serving as legal counsel. Ducera Partners is serving as investment banker and Kirkland & Ellis is serving as legal counsel to Franchise Group.