stock photo of yarn
TorQuest Partners is getting cozy with yarn.
Years after Listowel, Ont.-based Spinrite was pulled off the public markets the company is trading hands, and its new private-equity backer is stitching together a growth plan.
Spinrite is a major North American producer of craft yarn for knitters and crocheters. It sells well established brands like Patons, Caron and Bernat through big chains like Wal-Mart. Many of the acrylic fibers are created overseas in places such as Turkey or South America and then spun into yarn and packaged about two hours outside of Toronto.
It's a relatively low-cost operation with a widening customer base. But business hasn't been all warm and fuzzy for Spinrite. The company brought a whole different meaning to the phrase "yarn bomb" about a decade ago.
The Spinrite Income Fund hit the Toronto Stock Exchange in 2005, marketed with a trifecta of appealing traits: a knitting boom, an industry that appealed to retail investors and the fact that it was an income trust. The IPO was brought to market by New York-based owner Sentinel Capital Partners LLC and raised $202.9-million.
Two years later, the knitting boom bust, distributions to investors were cut and eventually income trusts became a thing of the past. The stock spun out and Sentinel took Spinrite private again, reacquiring it for $34.8-million – even as a "go shop" clause allowed time for other bidders to step in.
"They had a tough run … and it happened to coincide when they were public," said Daniel Sonshine, a partner at TorQuest. "There was a knitting fad that was out there in 2004," he said. "Things came off pretty quickly and put the whole industry under some pressure – lots of inventory writeoffs and at the same time we were battling an appreciating Canadian dollar. These guys are manufacturing in Canada [and] selling mostly into the U.S."
That currency dynamic is now reversed, and TorQuest is weaving a new path for Spinrite. "We will probably look to grow through acquisitions and there are some small, independent players that we might look at over time," Mr. Sonshine said, adding that debt woes have been sorted and the business has been profitable for the last eight years.
Spinrite's customer base is also growing again, and the business tends to be stable through economic cycles, Mr. Sonshine said. Plus, management has learned how to better manage industry fads and trends.
Much like making jams, growing heirloom gardens and home brewing, the fibre arts have been trendy in recent years and inspirational and instructional apps and websites such as like Pinterest and Youtube make doing-it-yourself easier than ever. And Etsy.com makes it possible for crafters to sell to an international buyer base.
"It's increased interest in projects because it's made finding designs and getting inspiration to do a project more accessible," Mr. Sonshine said of the way the Internet has changed Spinrite's business in the past decade.
But for a tactile product like yarn, brick-and-mortar stores are still king. Mr. Sonshine says that Spinrite's brands will primarily seek to boost sales from store shelves, rather than clicks. In fact, the target demographic for threads and yarns isn't hipsters, its women in their 40s to 50s.