C.banner International, the Chinese owner of toy store chain Hamleys, is said to be in the final stage of talks with Mukesh Ambani’s Reliance Retail to sell the centuries-old British company.
In 2015, C.banner International had paid $153 million for Hamleys, and since then the toy retailer has witnessed declining sales and valuations amid intense competition from online stores. The loss-making firm was finally put on the block in October last year.
If the talks succeed, Reliance Retail will be the fourth owner of the iconic chain in the past 15 years. Reliance already has a master franchise agreement with Hamleys for the Indian market, and has 80 stores in 32 cities across the country.
When contacted, a spokesperson for Reliance Industries, parent of Reliance Retail, said: “As a policy, we do not comment on media speculation and rumours. Our company evaluates various opportunities on an ongoing basis. We have made and will continue to make necessary disclosures in compliance with our obligations under the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 and our agreements with the stock exchanges.”
Hamleys has also held talks with three other suitors — billionaire Mike Ashley, founder of Sports Direct who also bought departmental chain store “House of Fraser” for $117 million; The Entertainer, a toy shop chain owned by Gary Grant which has over 140 stores in the UK; and Irish toy chain Smyth’s. However, the outcome of these talks are not known, sources said.
Reliance Retail’s strategy to bring in global retail brands into the country includes forming joint ventures in which they have an equity stake, or through franchise and brand licensing agreements. For instance, it has a 50-50 JV with Marks & Spencer in India and a similar venture with Grand Vision of the UK in Vision Care, the eye care chain. It also has over 40 brand licensing agreements with a bevy of well-known brands, including Steve Madden, Superdry, Villeroy & Boch (tablewear), West Elm (furniture), Quicksilver (sporting company) Replay (denim brand of Europe), Paul Smith, Salvatore Ferragamo, Brooks Brothers, and Kate Spade, among others.
The acquisition of Harleys will give Reliance Retail a global footprint in an industry that is facing stiff competition from both online and offline retailers. Though Reliance Retail has built a big sales network in India, it has no footprint overseas. Hamleys reported a loss of $15.6 million in 2017 and revenues of $86.5 million, thanks to market pressures including negative currency effects, according to Moneycontrol.com, which first reported about Ambani’s interest in the company. Reliance Retail has over 7,500 stores covering retail area of over 17.7 million sq ft, according to estimates by BOFA Merrill Lynch in FY18.
Founded in 1760 as a one store shop called Noah’s Ark, Hamleys opened its London flagship store in 1881 and now has 129 outlets across Europe, Asia, the Middle East and Africa. In India, it already has a tie-up with Reliance Brands to open 20 more Hamleys stores.
In 2003, Hamleys was delisted from the London stock market by Baugur Group, which had paid $68.8 million for the company. In 2012, it was sold for $78.4 million to Groupe Ludendo, a French company. Soon after the takeover, Groupe Ludendo hailed it as a platform to accelerate its international development. But the acquisition failed and led to its sale to C.banner International in 2015.
Hamleys’ fortunes continued to decline with falling sales and increasing losses. Hamleys Global Holdings, its ultimate parent company, said in October 2018 that its sales were improving, with a 2.7 per cent rise in sales growth in the first eight months of 2018 in the UK. The company also forecast that it would return to net profitability in the next 12 months.
The company’s sales suffered due to Brexit uncertainty, macroeconomic pressures, a fall in UK consumer confidence and falling customer footfall due to the threat of terrorism. The online sales have made matters worse, with new generation of shoppers buying toys online.