Toys group in £3.3m deal for 55% stake in Danish distributor

Oldham-based toys specialist The Character Group has acquired a Danish toy distributor in a deal that could be worth up to £3.3m.

Character has paid £300,000 for a 55% share in Copenhagen-based OVG-PROXY A/S, which sources and secures exclusive rights to toy products and then markets and sells them to retailers in the Nordic region.

A further ‘earn-out’ consideration of up to £3m will be payable, depending on performance, in each of the years ending 31 December 2018, 2019 and 2020.

The acquisition is expected to be earnings enhancing in the first full year in the enlarged group.

It is believed that the acquisition of this substantial interest in PROXY will enable the Character Group to extend its European reach, potentially enable frictionless access to EU markets post-Brexit, provide a more compelling marketing/distribution proposition for toy companies and brand owners seeking UK and EU market access, and provide a vehicle for growth of the group’s non-UK sales of its own-developed product ranges/resources.

PROXY, with 27 staff, currently sources product through a strong international network of suppliers and partners, including Character Group.

All product lines are sold exclusively in the Nordic region – principally Denmark, Sweden, Norway and Finland – by PROXY, with all sales to the top five customers, accounting for approximately 69% of turnover, managed in-house through its own sales force, with smaller accounts managed through distribution partners in the markets.

PROXY is headed by chief executive Morten Geschwendtner and chief financial officer Mikkel Kjærsgaard, both of whom have more than 25 years of experience in the toy industry and, also, have worked in collaboration with the Character team over several years.

The current team at PROXY will continue to run the day-to-day business.

To provide additional resource and skills to the senior team, Jon Diver, Kiran Shah and Mike Hyde – all executive directors of the company – will join the operating board of PROXY.

Jon Diver, joint managing director of Character Group, said: “We are delighted to secure a formal working partnership with the team at PROXY.

“Having known and worked with them for a number of years we have recognised that there are many opportunities to enhance our current market positions.

“There are many synergies that we can achieve together, including PROXY being able to take advantage of our Far East infrastructure in terms of sourcing and quality assurance and, on a domestic basis, our in-house marketing and distribution capability.

“Both teams are of similar mind set and together will be in a better position to grow our businesses.”

Morten Geschwendtner added: “As a leading toy products distributor in the Nordic territories, PROXY is very excited to have Character on board as a major investor in our business.

“We have known the Character team for a number of years and have mutual respect for each other’s businesses.

“This partnership allows us to work more closely with a well-respected international toy business and opens new opportunities; we will also benefit from being able to access the wider knowledge and skills of Character, as well as its sourcing, purchasing and marketing capabilities.”

He added: “We look forward to working with the team at Character, exchanging ideas and initiatives and growing our business further in the coming years.”