TORONTO — Royal Group Technologies Ltd. will expand its retail distribution business by acquiring a majority of Gracious Living Industries Inc., a marketer of patio furniture and housewares. Both companies are based in Toronto.
Royal, heavily concentrated in construction products, will have better access to mass merchandisers to sell its consumer-oriented products such as modular vinyl sheds and garage doors. Gracious Living's customers include U.S.-based merchandiser J.C. Penney, Wal-Mart's Canadian stores, and Canadian Tire, a Canadian nationwide retailer of hardware and auto parts. Gracious Living President Enzo Macri said his firm hopes to expand distribution into Wal-Mart's U.S. stores.
``Royal realizes that to be successful in retail it needs better distribution,'' noted Brad Smith, a research analyst with Midland Walwyn Capital Inc. of Toronto. ``Gracious Living knows the retail business.''
Smith said consumers are more and more receptive to Royal's vinyl sheds but the firm has not had a stable distribution program. Royal and Rubbermaid Inc. broke off their 15-month shed manufacturing and marketing joint venture in October 1996. Royal's sheds are high-end products based on extruded vinyl panels and posts. Smith said retailers have not liked the way Royal packages the bulky shed kits, which retailers find difficult to store.
Gracious Living has annual sales of about C$25 million (US$17.6 million). Macri said in a telephone interview that Royal has been its contract injection molder for nearly five years. Royal's majority ownership will help the firm develop other houseware products, but Macri would not be specific. Gracious Living recently launched a line of polypropylene indoor storage containers and expanded distribution of its patio furniture into South America.
Vic De Zen, Royal chairman, president and chief executive officer, said in a Dec. 3 news release that the takeover of Gracious Living will allow Royal to expand its injection molding operations. The deal also complements its outdoor products line and boosts its presence in retail distribution channels, he added.
Royal did not disclose terms of the deal, which is expected to close before Jan. 31. In a conference call meeting with analysts, Royal officials said the firm wants to acquire about 60 percent of Gracious Living, which is equally owned by Macri and a partner.
Royal's Building Technologies Group had sales of about C$33 million (US$23.2 million) for the year ended Sept. 30, up 170 percent over the previous year, according to the company officials. Sales include shed kits, garage doors and the Royal Building System modular housing system, sold mainly in offshore markets to date.
Royal's total sales for the year ended Sept. 30 were C$848.7 million (US$597.5 million), up 26 percent from the previous year. Net earnings were C$97.5 million (US$68.6 million), up 29 percent.