Character Group secures post-Brexit channels through Denmark investment

Character Group announced on Thursday that it has agreed terms to acquire a 55% equity shareholding in OVG-PROXY, a Denmark-incorporated toy distributor based in Copenhagen.

The AIM-traded firm said PROXY sources and secures exclusive rights to toy products and then markets and sells them to retailers in the Nordic region.

It said the purchase price comprised an initial cash consideration of DKK 2.5m (£0.3m), with further earn-out consideration of up to DKK 25m payable, depending on performance, in each of the years ending 31 December 2018, 2019 and 2020.

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

Character Group said it believed that the acquisition of the substantial interest in PROXY would enable it 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 its non-UK sales of its own-developed product ranges/resources.

PROXY, with 27 employees, currently sourced product through an international network of suppliers and partners, including Character Group.

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

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

Character Group said the current team at PROXY would 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.

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

“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.”

Diver said there were “many synergies” that could be achieved, including PROXY being able to take advantage of Character’s far east infrastructure in terms of sourcing and quality assurance and, on a domestic basis, its in-house marketing and distribution capability.

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