Elliott Buys Paper Source, Sees Synergy with Barnes & Noble

Elliott Investment Management has agreed to acquire the assets and business operations of Paper Source, a stationery and gift retailer.

Paper Source’s products include fine stationery, gifts, crafts, party supplies, gift wrap, and greeting cards. The company’s products are sold through approximately 130 retail stores across the U.S. and through its e-commerce website and wholesale products division.

Many of Paper Source’s products use colors and proprietary designs that are hand-illustrated by its in-house art and design team, as well as through a worldwide network of more than 1,000 artists. Paper Source, led by CEO Winnie Park, was founded in 1983 and is headquartered in Chicago.

Over the past few years, Paper Source has experienced a decline in sales from $153 million in 2019 to $104 million in 2020. In March 2021, Paper Source filed for Chapter 11 bankruptcy and the acquisition of the company by Elliott completes a restructuring of the business.

In August 2019, Elliot acquired publicly traded Barnes & Noble in an all-cash transaction with an enterprise value of $683 million. New York City-based Barnes & Noble is the U.S.’s largest retail bookseller with more than 600 bookstores in 50 states. The company also operates the e-commerce site BN.com, and its NOOK Store which sells digital books, periodicals and comics. At the time of its acquisition by Elliot, Barnes & Noble had TTM revenue of $3.6 billion and TTM EBITDA of $111 million. This equates to a 6.15x EBITDA multiple.

According to Elliot, the businesses of Barnes & Noble and Paper Source are highly complementary with many shared products. James Daunt, the CEO of Barnes & Noble, will have oversight responsibilities for both companies.

“I look forward to working closely with everyone at Paper Source,” said Mr. Daunt. “This is a wonderful brand, with a unique culture and community. With Paper Source’s management team, we will support and accelerate the brand’s strategic growth initiatives. Alongside this, the opportunities for Paper Source to work with Barnes & Noble are tremendously exciting for both businesses.”

“As the country’s leading specialty retailer of stationery, cards and gifts, we see tremendous future potential in Paper Source’s business,” said Paul Best, a portfolio manager and the head of European private equity at Elliott. “We look forward to working closely with the management team to position the brand for continued growth coming out of the pandemic.”

Elliott Management is an activist-themed hedge fund led by billionaire Paul Singer (his middle name is Elliott). The firm, with $42 billion of assets under management, was founded in 1977 and is headquartered in New York City.

© 2021 Private Equity Professional | May 13, 2021

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