Wiggle’s £200 million sale

Friday, 6 May 2011

Wiggle logo

No this isn’t retail, this is corporate deal making. In more business news UK online retailer Wiggle could be up for sale with a price tag of 200 million pounds (€225m / $325m) according to one business blogger. That’s one very big shopping basket.

The British bike shop is well known to many cycling consumers in Europe and beyond as it is one of the largest internet retailers with sales in over 70 countries. Owned by financial backers Isis Partners, it’s been incredibly fast growing, with sales growth of around 100% a year for the past few years.

For sale sign
Now it appears the shop has appointed Rothschild, a British investment bank to conduct a “strategic review”. Now you don’t hire an investment bank to advise on managerial options, normally specialist management consultants get involved for this. Instead “strategic review” is a euphemism for a sale, in other words a stockmarket flotation or the sale of the business to new owners.

Halfords deal?

Sky TV’s business correspondent Mark Kleinman says:

“I’m told that there has already been strong interest in Wiggle from potential buyers, although any process to sell or float the company is unlikely to be completed until next year. The obvious potential acquirers would include the likes of Halfords, bankers tell me.”

Halfords is a British retailer of auto parts and bikes and distributes Boardman bikes, part-designed by Chris Boardman and used by the United Healthcare team. This combination it would result in a very large cycle-orientated retailer. Alternatively were it to float on the stockmarket it might be interesting to follow the business or, for some, interesting to own a few shares.

Regardless of the future, it’s an interesting bit of business because it helps put a value on the growth of many online retailers, several other internet-focussed bike shops will be watching this sale closely. The days of independent bike shops are not over but the cycle trade is like many others where a few players can dominate the market, certainly the sale of everything else from bread to cameras to cars is now via large players and small independent shops are increasingly rare. This is not without controversy.

Finally if the deal does happen, note that I suggested this was likely to happen last September.

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{ 9 comments }

Raouligan May 6, 2011 at 2:19 pm

The worry is teh size of the packaging the item would come in…

Wiggle is well known for sending out tiny items in huge boxes!

Seemingly in the UK as the online retailers have grown the keen edge on price has disappeared to an extent and service doesn’t seem to have improved massively guaranteed free shipping has almost entirely gone especially if you want goods next day which was one of the initial joys of Wiggle CRC et al if the local shop didn’t have it Thursday afternoon you could order one and have it for the weekend.

Strangely teh lack of free next day delivery has pushed me back to the LBS for smaller items and if I’m after a larger purchase that isn’t urgent German shops now seem super competitive.

beev May 6, 2011 at 4:11 pm

i had a look at wiggle accounts a couple of years back, and frankly £200m sounds too cheap to me. From memory ’08 sales were of the order of £50m, margin around 18%, and a debt amount under £10m all of which was covered by inventory + plan to clear it. if sales are now about double that level, then the numbers look very good to see go for £275m+ ….

Alex Murray May 6, 2011 at 4:14 pm

I think you’ve underplayed the significance of Halfords as a bike retailer. Yes they are the exclusive distributor for Boardman bikes (it’s how he can get such good specs on his kit) but they are also the biggest bicycle retailer in the UK, full stop.

Despite this, they’ve struggled to modernise their bike offering, having tried to spin it into the Bikehut brand which they’ve now folded back into their stores. Wiggle would offer them an off-the-shelf solution to growing their bike business into online retail where they haven’t really got a footprint with the added bonus of combining the buying power of the two. That would probably be a significant bullwark against their competitor both online and in the high street.

From wiggle’s perspective, it would also offer a ready made network of stores where they could showcase their range and offer test rides. But I’d be suspicious of why they’d want to sell up now given their growth rate which must mean a much bigger market capitalisation longer term.

michael May 6, 2011 at 6:31 pm

I think that Dorel/Cycling Sports Group will be in this game when all is said and done. They lack a proven online sales platform for Cannondale and all their other brands. Wiggle already sells bucketloads of Sugoi apparel, which is owned by Dorel. I can see some synergy there and some cross-brand pollination with other brands under the Dorel umbrella – GT being a big one.

James May 6, 2011 at 8:48 pm

From my unfortunate experiences with Halfords I predict they ruin Wiggle within two years.

James II May 6, 2011 at 11:39 pm

One would hope a new owner would improve their service. I ordered from them once, was told the item was on back order and never heard from them again. Great business model.

The Inner Ring May 7, 2011 at 10:29 am

Raouligan: the local bike shop is as valid as ever, they just need to refine things and in my view, go from being a mere seller of bikes and parts into more of a “hub” for cyclists. This won’t work everywhere but in some places it can help.

Beev: it wouldn’t be a first to see a figure of X mentioned to attract buyers and then for it to be 1.25X when the sale is completed to show that the sellers got a price better than they believed, thanks to the “unique” skills of the bank advising on the sale.

Alex Murray: I think it’s more the financial investors thinking “job done” and using the prospect of fast growth to dangle in front of future buyers. The business still has plenty to achieve.

Michael: Dorel has lots of products but it does the manufacture and distribution, no? Retail would be a big change perhaps?

James / James II: a few customers always lose out but the big growth means they have to be getting it right for most people, no?

Lore Vantieghem May 7, 2011 at 6:38 pm

From past experience, Wiggle had always offered great value and service. Good luck to them !

Jimmyp May 9, 2011 at 5:11 am

Apart from the ‘back order never heard of them again’ experience of which I have shared, Wiggle has been the most frequent box you see being delivered into my Sydney office. Really annoys the distributors/ retailers, but how can you say no to 40% off (literally) Sydney prices?

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