Columbia's MaggieMoo's International, the ice cream chain with flavors ranging from eggnog to Red Bull sorbet, is being acquired by the New York company that emerged from the remains of former Maryland technology star Aether Systems.
NexCen Brands Inc. is paying about $16.1 million in cash and stock for MaggieMoo's, and also announced a $21 million deal yesterday for the assets of MaggieMoo competitor Marble Slab Creamery of Houston.
It is NexCen's first foray into food. The company recently acquired Athlete's Foot and clothing designer Bill Blass Holding Co. The MaggieMoo and Marble Slab acquisitions move the business into a power position within the gourmet ice cream world.
The player to beat is Cold Stone Creamery of Scottsdale, Ariz., which had sales of $408 million in 2005 and operates roughly 1,200 stores in 47 states, according to Hoover's. No other high-end ice cream business comes close to those numbers, analysts said, which suggested acquisitions and mergers would have to happen to compete.
Marble Slab and MaggieMoo's - respectively the No. 2 and No. 3 players - operate 520 stores between them, according to NexCen.
"It makes a lot of sense," said ice cream industry consultant and analyst, Malcolm Stogo of Riverdale, N.Y. "The question is whether it's the right company who bought them or not."
Nexcen said it will make money by generating royalties from franchise sales and plans to develop the brands of both businesses in the U.S. and internationally. It also wants to capitalize on MaggieMoo's mascot: a cow with long eyelashes and pouty lips.
"[We'd like to] extend that character into things like children's clothing and toys," said Robert W. D'Loren, NexCen's president and chief executive, during a conference call to discuss the acquisitions yesterday.
Americans spend more than $13 billion at ice cream shops each year, according to the International Ice Cream Association in Washington. Over the past decade, more of the money has gone to high-end shops such as MaggieMoo's, which calls its stores "treateries."
"It's super-premium ice cream," said Mark Leichtman, MaggieMoo's director of research and development as well as company operations.
All of the ice cream is made on site "smooth" - meaning no added chips or chunks until you request them - and served in a freshly baked waffle cone.
"That's really it in a nutshell," Leichtman said.
MaggieMoo's, which began in Kansas City, was located in Kansas and Missouri in 1996 when Maryland businessman Richard J. Sharoff bought the company. He moved the operation to Columbia, with plans to eventually take the concept national through franchising.
Since 2003, MaggieMoo's been run by Jonathan R. Jameson, a former executive at Panera Bread and chief operating officer of Denny's Restaurant Inc., who was tapped to meet a lofty goal: having 1,000 stores open by 2007. Today, there are 184 - 80 more than when Jameson was hired.
Jameson did not respond to an interview request.
Majority shareholder and MaggieMoo's Chairman Stuart Olsten said the sale to NexCen was the right move to build the business and the MaggieMoo's brand.
"NexCen's executives understand our business," Olsten said in a statement.
NexCen was once a dot-com darling in Maryland when it was based in Owings Mills and known as Aether, a developer of wireless communication technology.
Aether raised more than $2 billion in public stock offerings in 1999 and 2000, during the height of the tech mania, and its stock price once soared to more than $300 per share before crashing during the dot-com bust.
In 2004, it left technology behind and began investing in mortgage-backed securities. Then last year, it became a brand-management company, moved its headquarters to New York and dropped the Aether name.
NexCen's stock closed up 90 cents, or 9 percent, to $10.77 yesterday.