Bubs Signs Alliance with Chemist Warehouse and Completes Deloraine Acquisition


Bubs Signs Alliance with Chemist Warehouse and Completes Deloraine Acquisition

Infant nutrition product specialist, Bubs Australia Limited (ASX: BUB) on 18 April 2019, announced completion of the acquisition of Australia Deloraine Dairy Pty Limited and the placement to C2 Capital Partners.

This news comes on back of the announcement made by the company on 1 April 2019. BUB had announced that it would acquire Deloraine for a total consideration of A$35 million (cash plus shares).

Further, post the placement of BUB shares to C2 Capital Partners, Mr. Steve Lin, Managing Partner of C2 has been on-boarded to the Bubs Board as Non-Executive Director. Besides, the off-market share transfers by NuLac Foods Vendors to C2, are to be completed on 23 April 2019. Post which, C2 will have an aggregate 15 percent holding in Bubs Australia.

Additionally, on 18 April 2019, Bubs also announced to the exchange regarding a strategic equity-linked alliance with Chemist Warehouse Retail Group. Bubs has signed a binding heads of agreement to form a four-year strategic alliance with Chemist Warehouse Retail Group. The alliance entails promotion and sale of Bubs® products in Chemist Warehouse Stores, and it is scheduled to begin from June 2019.

Presently, Chemist Warehouse is the country’s largest pharmacy chain. Under the ‘My Chemist’ and ‘Chemist Warehouse’ banners it runs over 450 franchised stores across Australia and New Zealand. Moreover, the Chemist Warehouse Tmall Global store is the largest in the world by GMV.

The alliance with Chemist Warehouse would enable Bubs to sell the Bubs® products across Chemist Warehouse retail stores in the country.

Based on a success of Bubs® products (Limited range) sales on Chemist warehouse online stores, both the companies joined hands to expand the distribution of all Bubs® products to all Chemist Warehouse franchised stores and start marketing activity to maximise the potential of the Bubs® brand; Chemist warehouse would in return would charge marketing and promotional fee to Bubs.

Impressed by the response, Chemist Warehouse has reportedly decided to deploy the entire promotional and marketing fees to buy shares in Bubs. As per the agreement, an initial issue of 12.3 million fully paid ordinary shares in Bubs to be acquired in 2 tranches by Chemist Warehouse. This purchase would come out of the marketing and promotional fee.

Chemist Warehouse may purchase a maximum of 37,069,881 additional shares in Bubs which is subject to satisfaction by Chemist Warehouse of certain sales performance targets over a three-year window. These shares to be purchased in three annual tranches, each of 12,356,627 shares.

Jack Gance, the Chemist Warehouse Chairman and Co-Founder, believes that by the stated arrangement, they are transitioning from a typical supplier-customer relationship to a mutually beneficial long-term partnership and thus bring the Bubs range to a wider public.

Stock Information:

BUB’s shares have delivered a hefty return of 91.21 percent on a YTD basis. Further, the stock has provided 68.93 percent, 97.73 percent, and 12.99 percent in the past 6 months, 3 months, and one-month respectively.

The shares of BUB were last trading at $0.990 on ASX (As on 23 April 1), up by 13.79 percent as compared to the previous day’s closing price. The market capitalization of the Bubs is $387.01 million. The 52-week high price is $0.955, and the 52-week low price is $0.355. As per the latest updated ASX data, the Earnings Per Share stands at -$0.208.


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