- Blackmores has signed a sale agreement with McPherson’s to divest its subsidiary - Global Therapeutics business.
- The enterprise value of the transaction is A$27 million.
- The transaction is scheduled to complete by 30 November 2020.
- McPherson’s would fund the transaction via fully underwritten institutional placement launched today.
On 28 October 2020, ASX 200-listed Company Blackmores Limited (ASX: BKL) announced the signing of a business sale agreement under which McPherson’s Limited (ASX: MCP) would acquire BKL’s subsidiary, the Global Therapeutics business. The transaction has an enterprise value worth A$27 million.
The closing of the transaction is subject to completion of following conditions: transfer of a minimum number of employees and material contracts, no significant adverse change to the business, and customary adjustments for working capital. If all conditions are fulfilled, the acquisition is scheduled to be concluded by 30 November 2020.
Post the release of this announcement, the shares of Blackmores Limited by the end of the day’s trade stood at A$72.480, up 13.658% from the previous close. BKL has a market cap of A$1.23 billion.
During February 2020, Alastair Symington, the CEO of Blackmores Limited, had announced his intention to divest the non-core brands of the Company from its portfolio to focus on BKL’s new strategy.
Since 1999, Global Therapeutics has been a leader in harnessing the advantages of combining traditional herbal medicines with western complementary medicines, specially formulated to provide ideal therapeutic results. Global Therapeutics business comprises of brands like Fusion Health and Oriental Botanicals.
Who is Blackmores and McPherson’s Limited?
Headquartered in Sydney’s Northern Beaches, Blackmores is the leading natural health company of Australia, which has traditional naturopathic skill with scientific research to assist people in attaining optimum health and wellbeing.
McPherson’s is the foremost supplier of Health, Wellness & Beauty products in Australasia and progressively China. It operates in New Zealand, Australia, and Asia. McPherson’s manages portfolio of diversified brands like Swisspers, Dr LeWinn’s, Moosehead and Maseur, to name a few.
How the Acquisition Benefits McPherson’s?
The acquisition is highly complementary to McPherson’s stated strategy to expand its Health, Wellness and Beauty portfolio. The transaction would provide meaningful benefits to MCP through channel expansion, brand investment, export focus, and collaborations & operational efficiencies.
Financial Impact on MCP post Acquisition:
Global Therapeutics has a history of stable growth. In FY2020, the business reported net revenue of ~A$20 million and normalised EBIT of A$3.7 million.
With the acquisition of Global Therapeutics, McPherson’s Limited expects a mid-single EPS accretive in FY2021 on a pro-rata basis. Further, MCP believes that its balance sheet would also get strengthened post the acquisition and equity raising with the Company well positioned to continue its stated strategy to grow with further acquisitions of compatible business.
How would McPherson’s fund the business?
McPherson’s would fund the business by funds raised via Placement. On 28 October 2020, MCP launched a fully underwritten institutional placement to raise ~A$36.5 million in new equity via the issue of ~16.1 million new fully paid ordinary shares at A$2.27 per share. MCP will also raise A$10 million in addition through a non-underwritten Share Purchase Plan (SPP) at the same per share price.
The proceeds would support the acquisition of Global Therapeutics and will give additional balance sheet capacity for possible future acquisition and growth initiatives.