Swansea-based online premium bike retailer Tredz and sister bike replacement to the insurance sector firm Wheelies Direct, have been acquired by Halfords in a £18.4m deal.
Established by founders Keith and Michael Jones as a single bike shop in Swansea in the 1980s, Tredz and Wheelies now employ around 250 people.
Both will continue to head the businesses which will maintain their trading names under Halfords ownership.
Tredz is an online retailer of premium bikes and cycling parts, accessories and clothing.
Wheelies is the UK’s largest provider of bicycle replacement for insurance companies.
Collectively the two businesses generated revenue of around £32m for the year ended 29 February 2016, reflecting growth of 36% over the prior year, and EBITDA of £2.3m.
Gambit worked with Mike and Keith over a three year period in the lead up to the deal. Keith commented: "We are very grateful to our lead advisors Gambit Corporate Finance, who have worked with us on a strategic value maximisation initiative over a three year period. Frank Holmes, Partner, has sat alongside the board as a quasi Non-Executive Director for the past three years, providing regular strategic and commercial advice on a wide variety of external and internal matters. Ably assisted by Simon Marsden, Director, their input has helped us identify and source a market leading partner in the sector, Halfords, which will enable the businesses to flourish in the years to come."
The initial cash consideration is £18.4m and has been settled from the Halfords Group’s existing borrowing facilities. Dependent upon the financial performance of Tredz in the year ending 28 February 2017, there will be an element of deferred consideration payable in 12 months.
The total purchase price is expected to equate to an EBITDA multiple of around 7 times and the acquisition will be earnings enhancing from the first year of ownership.
Advised by corporate finance specialists Gambit and law firm Blake Morgan, owners Keith and Michael Jones will continue to lead the two businesses on a standalone basis.
Jill McDonald, Halfords chief executive said: “We are delighted with this acquisition, which we believe is a strong and complementary addition to the Group, extending our presence in the online market for premium bikes, parts, accessories and clothing.
"We continue to believe in the long-term growth potential of the cycling market. Keith and his management team have done a fantastic job of building a successful online retail operation and we look forward to working with them to develop and grow the businesses further.”
Keith Jones, group managing director of Tredz and Wheelies, said: “We are very proud of the businesses that we’ve grown from a small shop twenty seven years ago into a strong operator in the premium cycling market, with a team of over 250 people.
"However, the time has come for us to work with a partner on the next phase of growth.
"Halfords is exactly what we were looking for. With the support and resources of a large group, we look forward to building upon what we have achieved so far to drive long- term growth.”
Frank Holmes of Gambit Corporate Finance
Frank Holmes, partner at Cardiff-based Gambit Corporate Finance added: “We have had the pleasure of working with these companies through a value maximising programme and succession planning strategy which has culminated in a successful transition, which will enable the businesses to grow successfully. "
Simon Marsden, director at Gambit Corporate Finance: “As with many transactions, a successful outcome is quite often predicated on optimum market timing. Consolidation in the bicycle sector is at its peak and our clients have benefited from this opportunity.”
Wheelies began as a single bicycle shop in Swansea in the 1980s. Under Keith and Michael Jones’s ownership, the business expanded into mail order and insurance replacement during the 1990s.
Wheelies is now the UK’s largest provider of bike replacement on behalf of insurance companies and operates a highly experienced claims handling team, supported by a comprehensive bicycle validation system.
Tredz was launched as a separate e-commerce operation in 2005, with its own bricks and mortar presence added in Cardiff and Swansea two years later.
Tredz sells a wide range of bicycle, parts and accessories brands, including Giant, Specialized and Cannondale.
In 2014 Tredz opened the UK’s largest Giant brand store in Swansea.
The majority of sales are online; fulfilled from a separate warehouse operation where a team of highly skilled and experienced bike technicians build bikes, which are then carefully boxed and delivered direct to customers’ homes.