On 7 February 2019, Star Combo Pharma Limited (ASX: S66) announced that it has entered into an agreement for acquiring the businesses of Koala Mall Pty Ltd and Austoyou Group Pty Ltd for a worth of A$10 million.
The CEO of Star Combo Pharma, Su Zhang said that the due diligence of the company in August of last year has resulted in the successful acquisition of Austoyou and the Koala Mall retail business. These acquisitions are in line with the company’s strategy of acquiring an e-commerce platform that will advance the evolution of the business from a vitamin and supplements manufacturer & supplier to a fully integrated health care company coupled with manufacturing and multiple sales channels and the expansion of the distribution networks of the company.
The acquired businesses delivered approximately $17 million in sales in FY18 and had shown growth of more than 20% per annum in the past two years as demand for a broad range of Australian manufactured and quality-controlled consumer goods, continues to increase from Chinese consumers.
In 2018 the market in China, for vitamins and health supplements, was estimated to be in excess of US$5.2 billion along with continuous growth. Chinese consumers view Australian produced products as being of high quality and subject to rigorous regulation and quality control. Hence, the addition of the Austoyou e-commerce platform, which will deliver Australian made supplements direct to the consumer in China, is viewed by the company as a transformational acquisition that will accelerate growth plans with a significant near-term increase in revenue.
The acquisition details include Austoyou and Koala Mall will be acquired via the Share Sale and Purchase Agreement dated 5 February 2019 and will be completed in stages which includes immediate payment on settlement of 70% of the purchase amount structured as 50% cash payment and 50% in shares issued at $0.51. Secondly, 12 months post-settlement, a further 15% of the purchase amount will be paid. If any shares are to be issued for this payment, they will be issued at a 10% discount from the VWAP in the ten days prior to payment, with the final stage involving 24 months post-settlement, a final 15% of the purchase amount will be paid.
Now let us quickly have a glance at Star Combo Pharma Limited’s stock performance and the return it has posted over the last few months. The stock last traded at a price of $0.850 and increased significantly by almost 54.54% during the day’s trade, with a market capitalisation of $43.76 million. The stock has generated a negative return of 41.18% and 2.65% over the last six months and one-month period respectively. It has a 52-week high price of $2.030 and a 52-week low of $0.500, with an average trading volume of 19,035 approximately.
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