The purchase of Hamleys, which has its flagship store on London’s Regent Street, will illustrate the growing international ambition of Reliance Retail, which has a target of growing at 30 percent every year for a decade.
British toy retailer Hamleys which has been around since the time the East India Company established its strong presence in the country, is on the verge of getting acquired by Indian Businessman Mukesh Ambani backed Reliance Group. If the negotiations with the Chinese owner succeed, the 259-year-old brand will end up in the hands of Reliance Retail, India’s largest retailer, multiple sources involved in the negotiations told Moneycontrol News.
The purchase of Hamleys, which has its flagship store on London’s Regent Street, will illustrate the growing international ambition of Reliance Retail, which has a target of growing on a compound annual growth rate for the next ten years.
Reliance Retail is owned by Reliance Industries Ltd, India’s largest company in terms of market capitalization. If the deal goes through, Reliance Retail plans to increase the scale of economies and reach of Hamleys in interior parts of India.
“Due diligence for the deal is at an advanced stage,” said one of the sources cited above, adding, “Reliance Retail is aggressively pursuing the deal.”
Hamleys, which began life as ‘Noah’s Ark in London in 1760, counts the royal family of Saudi Arabia among its loyal customers. In recent years, though, it has been struggling due to uncertainty over Brexit and softening UK consumer confidence. It reported a loss of 12 million pounds in 2017 and a 2.5 percent decline in annual revenues to 66.3 million pounds. However, it is still a dominant player in the $11 billion worldwide toy industry even as rivals like Target, Walmart, Amazon and Kohl’s are snapping at its heels.
A source said the acquisition, if successful, will help expand Reliance Retail’s portfolio. “Reliance (Retail) can scale up Hamley’s business with its capabilities in supply chain management and strong distribution network.”
Reliance Retail already has a pan-India franchise agreement with Hamleys to merchandise and market its famous toys across its retail outlets. Hamleys has around 129 stores globally, a large majority of which are under the franchise model and outside the United Kingdom, the company is present in China, Germany, Russia, India, South Africa, the Middle East and other parts of the world.
“Hamleys currently has around 50 stories in India, the plan is to ramp it up to 200 over the next three years,” said another source familiar with the deal.
According to a report by market research firm IMARC, the Indian toy market was worth $1.5 billion in 2018, and has grown 15.9 percent compounded annually, between 2011 and 2018. IMARC expects the market size to cross $3.3 billion by 2024, driven by a huge base of young population, and strong economic growth. The report lists Funskool, Lego, Mattel and Hasbro as the main players in the Indian toy market.
Chinese fashion conglomerate C. Banner International had acquired Hamleys for £100 million in cash in 2015. Last year in October, C Banner wanted to exit toy business so there initiated the process of selling its stake and started looking out for potential buyers for the acquired toy company, according to a Sky News report. Corporate finance firm Vermillion Partners was hired to negotiate with bidders, the report said.
If the desired acquisition with Reliance Retail is done, than it would be marked the fourth time in history of Hamleys because it changed hands since it inception and also previously it was acquired by an Icelandic investor in 2003.
Reliance Retail is gearing up big time in retail space and is had entered into stronger partnerships with various iconic international brands such as Diesel, Marks & Spencers, Steve Madden and Kenneth Cole. It reported a turnover of Rs 69,198 crore for the financial year 2017-18.
Hamleys stores would have 5,000 products in the price range of Rs 10-25,000, he said. Hamleys was established by Cornishman William Hamley in London in 1760. As per the market reports it is estimated that toy market in India is around 2000 crore.