Another company to stand out in yesterday’s second day of selling (besides oOH!Media) was Sydney-based homewares and fabric seller Adairs which revealed a big move into the online space via a deal that could cost it more than $95 million in cash and shares.
Adairs shares surged more than 22% and ended the day up 21.7% at $2.13 after it revealed it was buying Kiwi-based retailer Mocka.
Adairs said it had entered into a deal to buy Christchurch-based Mocka for $75.2 million in cash and $15 million to $20 million in shares.
Mocka is a family-owned business founded in 2007, and primarily sells home furniture, kids furniture and baby goods into both Australia and New Zealand. In the 2019 financial year, the company’s sales were $37.2 million.
Adairs CEO, Mark Ronan said in a statement the two businesses were “highly complementary” as they were “both design-centric with in-house product design and development”, and the tie-up would see his company’s online sales almost double.
“This acquisition creates a larger more diversified business with increased exposure to the fast-growing online channel,” he said.
Adairs said the acquisition of Mocka will also strengthen its offerings in kids and baby furniture and provide the retailer with a significant foothold in the New Zealand market.
Mocka’s integration with Adairs follows Noni B’s $11 million purchase of NZ website Ezibuy (which has been several ownerships including one that cost Woolworths $330 million)
Adairs says its online sales currently make up 17% of total sales, (or $58.8 million in the 2019 financial year). With Mocka’s integration, Adairs is hoping to increase that share to 30% or around $100 million a year
Adairs says Mocka boosting earnings by around 10% in the current financial year, with the company providing investors with an earnings before interest and tax (EBIT) forecast of between $52 million and $56 million.
Mocka will continue to be run independently by its existing management.
Adairs said the buy is not expected to change Adairs’ existing dividend policy or impact the scope or timing of the supply chain initiatives currently under review.
The acquisition will be funded through a combination of Adairs’ group term debt facilities and an issue of around.3.2 million ordinary shares to the vendors or around 1.9% of Adairs issued capital.