Private equity firm Aurora Capital has shelved plans for a takeover of troubled chocolatier Yowie, and said it would support “an orderly wind up” of the business if management cannot come up with a solution to turn around the business in the near future.
Aurora said it had “regretfully” reached the decision that Yowie’s June quarter financials released on Thursday represented a material adverse change that would trigger a defeating clause in its $19.6 million takeover bid.
The private equity firm accused the Yowie Group, whose shares dropped by as much as 12 per cent after emerging from a trading halt on Friday, of rationalising a continued poor performance.
Yowie had on Wednesday announced an expected full-year earnings loss of $US2.3 million ($A3.31 million) – including a $US1.2 million loss in the three months to June 30 – due to increased marketing, the roll out of new products, and legal costs associated with takeover bids.
Yowie said its FY19 loss would, however, be an improvement on the $US5.0 million loss in the previous year, while chairman Louis Carroll flagged a return to net sales growth in FY20 as new products rolled out and distribution in Australia and US expanded.
Carroll told AAP he disagreed with Aurora’s summation of Yowie’s results, but welcomed the withdrawal of the firm’s takeover bid.
“I think it is speculation on (Aurora’s) part … and not based on anything we see,” Carroll told AAP.
“At this very early stage of the year, we have every confidence that (a profit in FY20) will happen, and people suggesting that it won’t don’t have anything to base their belief on.”
Aurora, however, said it believed Yowie’s final FY19 result would be worse than it had stated, and that the preliminary figures released Thursday still flew in the face of management’s numerous promises to stabilise the company by the end of FY19.
“Further, the company has continued to rationalise its adverse performance, whilst operating losses have continued to increase unabated, with no clear pathway towards profitability,” the fund manager said in a release.
Yowie’s treats rose to prominence in Australia in the late 1990s as consumers sought to complete the collection of small plastic wildlife figurines contained within.
But the product disappeared from shelves in 2005 when then-owner Cadbury Schweppes fell out with brand creators – author Bryce Courtenay and advertising identity Geoff Pike – and ceased production.
In 2012 Yowie Group obtained the intellectual rights and relaunched the product in the US, securing a spot on the shelves of retail giant Walmart.
But by the time Yowies were back in Australian stores in 2017, the ASX-listed company’s losses were mounting while it consistently fell short of sales guidance.
The company has also acknowledged the re-emergence of Kinder Surprise in US supermarkets after a decades-long hiatus also hurt sales.
Yowie shares slumped as low as 5.2 cents in June this year – well down on the 15-year high of $1.25 reached mid-2015 – as sales continue to fall and a return to profit proves elusive.
In March, Keybridge Capital swooped in with what would be an unsuccessful $20 million takeover bid, before Aurora took a tilt of its own with an unsolicited offer equal to 9.0 cents per Yowie share.
Yowie pledged earlier this month to return 2.0 cents per share to investors in an attempt to fight off Aurora’s unsolicited bid.
Aurora said this week while it would continue to monitor the Yowie business, it would support the company pursuing an orderly wind up if things didn’t get better.
“Unless Yowie management can see the business turning around in the near term, Aurora would be supportive of the company pursuing an orderly wind up of the Yowie business, with further capital returns being distributed to all Yowie shareholders.”
Yowie shares were worth 7.2 cents at 1440 AEST on Friday, down 7.69 per cent.