Bubs Australia has entered into a conditional sales and purchase agreement to acquire Melbourne-based infant formula producer Australia Deloraine Dairy (Deloraine).
The company has agreed to pay a cash consideration of A$25m ($17.7m) and 15,384,615 Bubs shares, amounting to the value of A$10m ($7.1m).
Upon meeting certain performance targets, Bubs Australia has agreed to pay up to A$15m ($10.6m) to Deloraine vendors over three years in equal annual instalments.
Bubs Australia founder and CEO Kristy Carr said: “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.
“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.”
The acquisition of Deloraine offers Bubs competitive advantages due to “authentic provenance, including 100% Australian goat milk with full traceability back to farm gate, and scalable capacity to increase volume to meet growing future demand. ”
Deloraine is one of the 15 canning facilities in Australia authorised by the Certification and Accreditation Administration of China (CNCA) for physical importation into China.
Additionally, Bubs signed an agreement with private equity firm C2 Capital Partners for a share placement of A$0.65 per share. This will help the infant formula maker to raise approximately A$31.44million, before costs.
After the placement, C2 will buy additional shares in Bubs via off-market acquisitions from existing shareholders, theNuLac Foods Vendors. This will give C2 an aggregate 15% holding in Bubs.
With the capital investment, C2 managing partner Steve Lin will join the Bubs board as a non-executive director.
It plans to partly use the raised funds for the Deloraine acquisition.
Steve Lin said: “We have been very impressed with the important milestones that Bubs has achieved in Australia and China.
“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.
“We are pleased to partner in its financial underpinning and look forward to contributing impactful strategic value.”
Last month, Bubs anounced plans to form a joint venture (JV) with infant nutrition company Beingmate to distribute and promote its portfolio of infant formula and baby food products in China.
