Russ Berrie buys LaJobi and CoCaLo

Major gift and juvenile product vendor Russ Berrie and Co. has signed agreements to acquire two infant and juvenile products companies: LaJobi Inds. , a privately held infant furniture company based in Cranbury, N.J., and CoCaLo, a privately held infant bedding and accessory company based in Costa Mesa, Calif.

CoCaLo manufactures and distributes its products under the CoCaLo Baby, CoCaLo Couture and Baby Martex brands.

LaJobi Inds., whose net sales for 2007 were $54.3 million, will be bought by LaJobi Inc., a newly formed, indirect subsidiary of Russ Berrie, for $47 million, plus or minus a working capital adjustment. Sellers may earn an additional payment ranging from zero to $15 million based on the compound annual growth rate of the acquired business through 2010. LaJobi Inc. will enter into a three-year employment agreement with Lawrence Bivona, LaJobi Inds.' co-founder, CEO and president, while the other co-founder, Joseph Bivona, will serve as a business consultant through 2008.

Another newly formed subsidiary of Russ Berrie, I&J HoldCo Inc., will acquire all of the capital stock of CoCaLo for $16 million, plus or minus a working capital adjustment. Some $1.6 million will be paid in equal annual installments over a three-year period. Sellers may earn additional payment ranging from zero to $4 million based on the performance through 2010 of certain sales, gross profit and EBITDA measures. Renee Pepys-Lowe, CoCaLo's founder and president, will enter into a three-year employment agreement with I&J HoldCo.

Bruce G. Crain, Russ CEO and president, said, “We plan to maintain the individual brand identities and management structures of both LaJobi and CoCaLo, while building on the strengths of these companies. … We are enthusiastic about the potential growth prospects at both LaJobi and CoCaLo through product and distribution channel expansion.”

Russ also plans to expand its existing Infant & Juvenile segment credit facility to provide for up to $175 million in senior bank financing, in order to finance the acquisitions of LaJobi and CoCaLo and “provide additional financial flexibility,” the company said in a statement.

Russ Berrie is known as the university of the gift industry for the many executives who started their careers with the vendor. Founder Berrie passed away in 2002; several years later, the shares he left to the charitable foundation that bears his name were purchased by private equity firms D.E. Shaw Laminar and Prentice Capital Management. Restructuring efforts have since paid off in increased sales. The company rejected a buy offer in June 2007, saying it undervalued the company, and it named new CEO Bruce Crain in December 2007.

Russ also released its fourth quarter and full year results for 2007; consolidated net sales for the fourth quarter grew 14.3% to $84.5 million as a result of higher sales in both the Infant & Juvenile and Gift segments.