Navarre Corp., a consumer products distributor and provider of warehousing, shipping and supply chain services for retailers and manufacturers, has agreed to pay $50 million in cash and stock for SpeedFC Inc. SpeedFC sells hosted e-commerce technology, order management, customer service and fulfillment technology and services.
“The acquisition of Speed rounds out our end-to-end retail distribution and e-commerce services platform and provides us with a broader base of e-commerce clients,” says Richard Willis, president and CEO of Navarre. “We expect Speed’s clients to benefit from our multichannel sales solutions, which include retail distribution and third party logistics programs, while their software-as-a-service e-commerce platforms and call capabilities are highly complementary to our existing business.”
The deal comes at a time when Navarre—whose clients include such top-tier retailers as Best Buy Co. Inc., Wal-Mart Stores Inc., Apple Inc., Staples Inc. and Amazon.com Inc.—is hurting from shifts in its traditional businesses, including declines in the distribution of home video products and software disks, while experiencing an increase in services to manufacturers and retailers in the e-commerce industry, the company says. Navarre reported a 12.3% year-over-year drop in net sales to $91.3 million from $104.1 million for its first fiscal quarter ended June 30, resulting in a net loss of $571,000, compared to a year-earlier net loss of $627,000.
On the brighter side, however, it said its Q1 net sales through the e-commerce channel increased 18.2% year over year to $16.2 million from $13.7 million a year earlier, and that its sales in Canada, where it opened a distribution facility in Toronto last year, rose 32.6% year over year to $12.2 million from $9.2 million.
SpeedFC, which is privately held and doesn’t report complete financial information, has increased its annual net sales “more than 40% compounded annually since 2009,” according to Willis. “We expect its net sales to grow over 40%, driving greater than $80 million in adjusted EBITDA at more attractive margins than our existing businesses,” he says. EBITDA, or earnings before interest, taxes, depreciation and amortization, is a widely used standard of financial performance.
SpeedFC has a client base that covers more than 30 brands, including such retailers as Shopko Stores, Yankee Candle and The Limited. The company will continue to be headed by SpeedFC Jeff Zisk, who founded the company in 2000. Under terms of the acquisition agreement, Zisk will become Navarre’s largest shareholder.
Roth Capital Partners is the lead financial advisor to Navarre, and Craig-Hallum the co-advisor.
SpeedFC provides fulfillment and contact center services as well as order management technology for two retailers in the Top 500: The Yankee Candle Co. Inc., No. 346, and The Limited, No. 406. The company also provides fulfillment services for two of the Second 500 retailers: ShopKo Stores Operating Co., No. 584, and Spencer Gifts LLC, No. 689. SpeedFC also provides order management software for Spencer Gifts.