(Dealbook) The online baby and maternal products company BebeStore completed an agreement to acquire its former rival Baby, and was expected to announce the deal this week.
Financial terms have not been disclosed, but it is not believed to be a very large deal. Baby was once the darling of Silicon Valley when it came to e-commerce in Brazil.
The cash transaction took place over the last several months, but was completed on Monday, Leonardo Simão, BebeStore’s co-founder and chief executive, told DealBook.
Baby generated R32m (about US$15m) in revenue in 2013, and is expected to take in 45 million reais in revenue this year, Mr. Simão said.
BebeStore took in 48 million reais in revenue in 2013, and expects to generate 110 million reais this year.
BebeStore, backed by the London-based venture capital firm Atomico and the local investment firm W7 Brazil Capital, will acquire Baby’s assets, which include its brand, customers and inventory stock. It will not add any of Baby’s employees, Mr. Simão said.
A spokeswoman for Baby, Bruna Caselato, declined to comment on the deal.
The co-founder and current chief executive of Baby.com.br, Kimball Thomas, will shift over to Dinda, an online flash-sales site for maternal and baby products that the company started in 2012 to complement Baby.
Dinda continues to have the same prominent investors Baby had, including the investment firm Tiger Global Management, Accel Partners, São Paulo-based Monashees Capital, Felicis Ventures, Menlo Ventures, Ron Conway’s SV Angel and other private investors.
By contrast, Mr. Simão and his wife, Juliana Della Nina, initially took a much leaner approach, eschewing external financing when they founded BebeStore in São Paulo in 2009.
“I did not want investors at all,” Mr. Simão said in a 2012 interview with DealBook.
In 2010 and 2011, an Internet start-up boom started to take root in Brazil, drawing foreign investors and foreigners themselves, including many Americans.
Those included Davis Smith, who received his M.B.A. from the Wharton School of the University of Pennsylvania, and Mr. Thomas, his cousin, a graduate of Harvard Business School. Together, they started Baby in São Paulo in 2011.
At that time, Mr. Simão was forced to change business strategy in light of the new upstart. In 2012, he said he finally gave in and took money from Atomico. “The scenario three years ago is very different from what it is today,” he said at the time.
BebeStore is not profitable. But Mr. Simão says that the acquisition will allow the company to become profitable by this December, instead of in April 2015.
Initial talks between the two companies looking at a possible merger started in 2013, but they could not reach an agreement, Mr. Simão said.
By then, many e-commerce companies were struggling under fierce competition, so many Silicon Valley firms sought to diversify their investments in Brazil. Around that time, Mr. Smith left Baby to return to the United States.
Earlier this year, Baby hired Credit Suisse, looking for suitors, according to a person briefed on the company’s plans. He requested anonymity because the information was private.
In May, an initial agreement was reached, and Baby’s site was run by BebeStore. Baby also laid off several employees.
Other competitors in the market remain including the online sites like Tricae and brick-and-mortar retailers looking to expand online, like Ri Happy/PB Kids, a large Brazilian toy retailer owned by the Carlyle Group.
BebeStore also added a new investor this month, Endeavor Catalyst, an investment pool run by the New York-based nonprofit Endeavor, which contributed $500,000.