AUSTRALIA – The Australian infant-formula and baby-food company, Bubs Australia has agreed to fully acquire infant formula peer producer Australia Deloraine Dairy (Deloraine) as it looks to expand its products range.
The transaction will be through a cash consideration of US$17.66 million (A$25 million) and 15,384,615 Bubs shares to the value of US$7.06 million (A$10 million), at a strike price of A$0.65 (US$0.46) per share.
Bubs expects to fund the acquisition through a financing round led by private equity firm C2 Capital Partners.
one of only 15 licenced canning facilities in Australia authorised by the Certification and Accreditation Administration of China (CNCA) for physical importation into China, thus the deal expands Bubs’ growth in China.
Bubs first entered a manufacturing agreement with Deloraine in June 2018 to produce Bubs® goat milk infant formula and CapriLac® goat milk powder products.
Deloraine has a manufacturing plant in Melbourne, Victoria has the capacity to process 10 million tins with its existing production line and could double capacity with incremental capital expenditure in the future.
“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,” said Bubs Australia Founder and Chief Executive Officer, Kristy Carr.
“Importantly, the acquisition will have a significant positive impact on our business through a material reduction in our production costs, as well as placing Bubs in the best possible position to achieve SAMR brand registration to enable the Company to export their infant formula products to China to be sold in physical Mother and Baby stores.”
As part of the investment agreement, C2 will ultimately hold a 15% stake in Bubs and the firm’s managing partner Steve Lin will join the Bubs board as a non-executive director.
“We see great potential in China for Bubs, an authentic Australian brand that is building on a sophisticated vertically integrated supply chain and high-quality and trustworthy infant nutrition product portfolio,” said Lin.
“We are pleased to partner in its financial underpinning and look forward to contributing impactful strategic value.”
The buyout strengthens Bubs focus on growth in China, where it recently said will form a joint venture with dairy company Beingmate to sell its portfolio of infant formula and baby food products.
Under the proposed venture, Bubs will supply its products to Beingmate’s distribution network, which covers 30,000 stores throughout China.