Apollo Global Management Inc. and BlackRock Inc. are making headlines as they engage in talks to provide fresh debt financing for the merger of two prominent Amazon aggregators. This move signals continued consolidation within this sector, which had raised substantial amounts of capital only to face difficulties as the COVID-19 pandemic e-commerce boom begins to fizz out.
The latest development involves Branded, headquartered in Paris, which is reportedly set to acquire San Francisco-based Heyday. According to insiders familiar with the negotiations, the transaction is pegged at $521 million and will result in the formation of a new company named Essor, which translates to "take flight" in French. With forecasts indicating the new entity could be valued at over $1 billion, this merger showcases significant ambition within the Amazon aggregator market.
The construction of Essor is aimed to include new debt from BlackRock, Apollo, and Victory Park Capital, which has backed Apollo. This financial backing is intended to support Essor's activities, particularly assists it in acquiring other distressed direct-to-consumer brands—a market currently struggling to regain its footing post-pandemic.
Both BlackRock and Apollo have been involved in funding various Amazon aggregators, and as some of these firms started facing repayment issues, certain loans were shifted to non-accrual status. This indicates the increasing pressures within the industry and highlights the need for more strategic maneuvers like merger and acquisition activity.
Branded, helmed by CEO Pierre Poignant, has been recognized for its strong management team. Poignant is best known for co-founding Lazada, the Southeast Asia online marketplace where Alibaba Group holds significant equity. Under his leadership, Branded has successfully raised $140 million, attracting investors from diverse backgrounds, including Berlin's Target Global. Their portfolio includes the Puracy line of plant-based cleaning products, showcasing their commitment to sustainable consumer goods.
On the other hand, Heyday, co-founded by Sebastian Rymarz, brings to the table its own history of raising capital—over $250 million from sources like Khosla Ventures and General Catalyst, plus additional support from Victory Park Capital. Rymarz will play a pivotal role as the new president of Essor, with expectations of achieving annual revenues around $400 million. Heyday's brands, such as the acne treatment Zitsticka, known for its presence at Target, and the fluoride-free toothpaste brand Boka, are set to benefit from this merger.
One of the primary strategies for Essor’s market approach will be leveraging physical shelf placement to boost online brands' sales. With over 80% of consumer spending still taking place in brick-and-mortar establishments, Essor’s commitment to introducing promising online brands to these retailers is seen as a viable route to success.
Looking back, the aggregation trend saw multiple firms entering the market with bold claims of transforming e-commerce, yet many now find themselves grappling with substantial debts. A key example is Thrasio, which previously led the charge for aggregators and has since filed for bankruptcy protection after racking up large amounts of debt. The current restructuring activities, including the Branded and Heyday merger, highlight the industry's need to adapt to the changing post-pandemic retail environment.
While Apollo has previously committed to investing up to $500 million through senior secured credit facilities, the situation remains tense. BlackRock’s involvement is under scrutiny, especially as it has had to pivot its approach on several loans within the Amazon aggregator sector. Although aggregate losses pose sharp challenges, stakeholders are hopeful this merger could act as a stabilizing marker for the ecosystem.
The formation of Essor under the guidance of experienced leaders Poignant and Rymarz aims to navigate the tough waters of the modern consumer market. It remains to be seen if this new company will be able to effectively leverage its funding and ambitions to create value and succeed where many others have stumbled.