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Magellan’s merger may give sales a lift

By   /   Friday, December 9th, 2011  /   Comments Off on Magellan’s merger may give sales a lift

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Santa Barbara-based Magellan’s Travel Supplies and Colorado Bag’n Baggage are joining forces to battle the difficult retail climate.

The two companies, both of which are considered leaders in the U.S. luggage and travel products industry, announced the merger on Dec. 1. Magellan’s operates mainly as a catalog business, with a customer base of 1.8 million catalog and e-commerce customers, while Bag’n Baggage follows a more traditional brick-and-mortar model with 30 storefronts in nine states across the U.S.

Both companies struggled to hold onto customers during the recession — with fewer people taking trips, the market for travel products took a hit.

“Magellan’s and Bag’n Baggage went through the same thing,” said Ken Gart, a partner at Gart Capital, the Denver company that owns Colorado Bag’n Baggage. “They had a lot of trouble when the economy crashed and people stopped spending money. Both have brought themselves back to profitability.”

The next step toward revitalization is to combine Magellan’s catalog business with Bag’n Baggage’s retail stores. Lynn Staneff, the marketing director at Magellan’s, said the merger is strategic because while the companies are targeted at a similar demographic, they produce different products.

Magellan’s sells products designed to make travel easier and more convenient, like steel-reinforced handbags, travel vests and neck pillows. As its name suggests, Bag’n Baggage mostly sells luggage. And Bag’n Baggage is geared towards the high-end traveler, while Magellan’s is more practical and functional, Staneff said.

“There’s almost no overlap in products, but our products do complement those of the other,” she said. “Our expertise is primarily in catalogs. With the merger, we have an opportunity to open more physical retail stores. And we can certainly help Bag’n Baggage with an enhanced Web presence and the use of more catalogs.”

Magellan’s was founded in 1989 by former Pan Am employees John and Gloria McManus, who created the company to make travel simpler and safer. Private equity firm Sverica International bought Magellan’s in 2006. Staneff said the McManuses are no longer involved in the company and spend their time traveling the world.

Magellan’s has two physical locations, one in Santa Barbara and one in Santa Monica, and reported about $30 million in revenue in 2011. It employs 100 people.

Gart Capital is a family-owned business that operated a chain of Colorado-based sporting goods stores that were eventually sold to Sports Authority. In addition to the company’s retail operations, it has real estate holdings in Colorado. Colorado Bag’n Baggage was founded in 2008 when Colorado Baggage merged with Dallas-based Bag’n Baggage.

Once the merger is complete, Sverica and Gart Capital will each own 50 percent of the combined company. The financial details of the merger were not disclosed. Gart said a new company, which will officially be created on Jan. 1, will technically own the combined business.

From a practical standpoint, Staneff said, operations at Magellan’s and Bag’n Baggage will remain relatively unchanged for the time being. Though the stores are currently operating independently, the ultimate goal is for Magellan’s to open more storefronts and for Bag’n Baggage to expand its catalog and online offerings.

Magellan’s CEO Mark Gallo will continue to run that company, and Tom Nelson will stay on as CEO of the Bag’n Baggage chain.

“At this point, a lot of the details are to be determined,” Staneff said. “We just announced the deal, and now we need to take a few months to figure out exactly how we want to work it. Nobody knows exactly what the arrangement will be, but one thing we do know is that when you double the size of your business, you increase your purchasing power.”

The idea for the merger has been brewing for the past few years, Gart said. Hap Klopp, one of the founders of outdoor retail giant The North Face, is a member of Magellan’s board of directors. Gart is also acquainted with Klopp — they were both students at the Stanford Graduate School of Business in the early 1980s.

The two travel industry heavyweights reconnected over the past few years, and they got to talking about combining Magellan’s with Bag’n Baggage.  “It just made a lot of sense,” Gart said.

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