Bubs Australia, the infant-formula and baby-food company, has struck a cash-and-shares deal to acquire Deloraine Dairy, a peer in the sector based in its home market.
In a stock-exchange filing announcing the transaction, Bubs also said it would sell shares in its own business to private-equity firm C2 Capital Partners.
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The Deloraine Dairy deal will see Bubs Australia pay AUD25m (US$15.9m) in cash, plus shares worth AUD10m for a business that is already a manufacturing partner and which is approved to ship to China.
The share sale to C2 Capital Partners will lead to the private-equity firm having a 15% shareholding in Bubs Australia.
Bubs Australia and Deloraine Dairy struck a manufacturing deal in June 2018 to produce Bubs goat’s milk infant formula and CapriLac goat’s milk powder products. The Deloraine Dairy plant has the capacity to process 10m tins with its existing production line and could double capacity with more capital expenditure in the future, if required, Bubs Australia said.
Reflecting on the acquisition of Deloraine Dairy, 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.
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By GlobalDataCarr said the acquisition would lead to “a material reduction” in Bubs Australia’s costs and put the company “in the best possible position” to secure registration from Beijing to export infant-formula products to China for sale in mother-and-baby stores.
She added: “We believe this is a win-win all round – for Bubs and Deloraine’s customers, suppliers, relationship partners and employees alike. In the meantime, we don’t intend to change any material aspect of the Deloraine business or the customers it already serves. Deloraine’s principal and general manager will continue the day-to-day management of the business as a full-time employee of Bubs.”
Steve Lin, managing partner at C2 Capital Partners, is to join the Bubs Australia board as a non-executive director.
C2 Capital Partners is to buy the stake in Bubs Australia through a private share placement and other off-market share acquisitions. Bubs Australia said part of the proceeds from those transactions would go towards the Deloraine Dairy acquisition and to “accelerate China market development and brand building”.
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.”
