Bubs Australia has announced plans to buy Melbourne-based infant formula producer Australia Deloraine Dairy, one of just 15 licenced canning facilities in Australia that meets regulatory import conditions into China.
Bubs will pay $25 million in cash plus $10 million in Bubs shares, with further payments of up to $15 million if certain targets are met.
Bubs Australia founder and chief executive officer, Kristy Carr said the acquisition is a “win-win all round”.
“This is a key foothold in Bubs vertical-integration strategy to maximise control of our supply chain and represents an important step in our vision to expand our China business, Carr said.
She said the acquisition will have a significant positive impact on the business through a material reduction in production costs, and will place Bubs in the best possible position to achieve SAMR brand registration, enabling the company to export infant formula products to China to be sold in physical Mother and Baby stores.
“We believe this is a win-win all round – for Bubs and Deloraine’s customers, suppliers, relationship partners and employees alike.”
Deloraine’s principal and general manager will continue the day-to-day management of the business as a full-time employee of Bubs.
Bubs also announced on Monday that it has entered into an agreement for a private share placement, at 65 cents per share, to private equity firm C2 Capital Partners, which will raise approximately $31.44 million, before costs.
Following the placement, C2 will also acquire additional shares in Bubs via off-market share acquisitions from existing shareholders, the NuLac Foods Vendors, giving it an aggregate 15 per cent holding in Bubs. Funds from the capital raising will be used, inpart, for the Deloraine acquisition.
C2 Managing Partner Steve Lin will join the Bubs Board as a Non-Executive Director.
John Gommans will retire from the Board of Bubs but will remain a key adviser to the company.