Electra walks off with Hotter Shoes

The London-listed trust's buyout has netted previous owners Gresham a gross return of more than 3.5x.

Gresham Private Equity has sold its stake in footwear company Hotter Shoes to Electra Partners.

Financial details of the transaction were undisclosed, but it is understood Electra has invested £85 million of equity. The total deal value is understood to be “up to £200 million”. Lloyds Banking Group and HSBC provided debt for the transaction, according to a statement from Electra.

Electra and Gresham declined to comment beyond the statement. However according to a market source Gresham made a gross return of “more than 3.5x” on the deal.

Hotter, which was created in 1959, is a UK designer, manufacturer and footwear retailer. Headquartered in Lancashire, Hotter sells more than two million pairs of shoes each year in the UK and internationally.

Under Gresham’s ownership, the company has grown its customer base and has more than doubled its sales in the last four years, with online sales increasing more than 300 percent. Hotter has also opened 51 new standalone branches growing from five to 56 and created more than 500 jobs. It has developed “a strong presence” in the USA and explored further opportunities in the Middle East, Russia and Germany, according to a Gresham statement.

Gresham invested in the business in 2007 using its Fund IV, a £340 million 2006 vintage, according to PEI’s Research and Analytics division. Following the sale of Hotter, it is understood Gresham has divested three businesses from the 13 companies in this fund.

The exit could pave the way for Gresham to return to the fundraising market this year. Its latest 2006 fund is almost fully invested but has capital left for add-on acquisitions. Last year, Gresham pushed back fundraising for its fifth fund until the beginning of 2014, after the firm concluded investors needed to see a few more exits before they would consider re-upping, several sources close to the matter told PEI in July.

Last year, Gresham sealed two exits: it sold recruitment firm Swift Technical Group to Wellspring Capital Management for a 2x return in November. It also sold training company 7City for approximately £90 million, netting the firm a 3x return.

Electra’s acquisition comes after the London-listed investment trust accelerated its deal activity last year. Electra invested £337 million in the year ending September 30, more than double than the £150 million it invested in the year to 30 September 2012. It made five investments during the period, including holiday parks operator South Lakeland Parks, which it acquired for £47 million.