13/07/21; Australian Financial Review
Meal kits supplier HelloFresh is set to widen the gap with arch rival Marley Spoon by moving into the ready-made meals sector, offering to buy recently-listed Brisbane based company Youfoodz for $125.3 million.
If the acquisition of Youfoodz is successful, it promises to boost HelloFresh’s net revenues in Australia by about $150 million a year and increase customer numbers by at least 145,000.
HelloFresh Australia CEO Tom Rutledge: “The intention is to maintain Youfoodz as a stand alone company …”
“We have an ambition to become one of the largest direct-to-consumer food businesses in the world and ready-to-heat is an obvious extension for us as an adjacent category, leveraging a lot of capabilities,” said HelloFresh chief executive Tom Rutledge.
“The intention is to maintain Youfoodz as a stand alone company but we’d have a broader offer and a broader addressable market and … have a bigger range of convenience focused meals,” he said.
HelloFresh, which is Australia’s largest meal kits supplier, has offered 93¢ a share by way of a scheme of arrangement – 82 per cent above Youfoodz’s last close of 51¢ and more than double its one-month volume-weighted average price of 44¢.
The offer will crystallise a loss for shareholders who bought into Youfoodz’s $70 million initial public offering in December. The shares were issued at $1.50 each and have never traded above the issue price.
However, it represents a long-awaited payday for founder Lance Giles and his family, who started making ready-made meals in Brisbane in 2012. Mr Giles will continue to run Youfoodz.
The Giles family and other founding shareholders now own about 14.5 per cent of the company and did not sell any of their shares into the IPO, which valued the company at $202 million, almost twice as much as the value of the HelloFresh offer.
Youfoodz makes about 400,000 ready-made meals and snacks a week from its three facilities in Brisbane.
The company had forecast net revenue to climb 17.7 per cent this year to $149.9 million and expected to make its first profit in years, earning $500,000 before interest, tax, depreciation and amortisation after racking up accumulated losses of about $60 million over the last eight years.
Youfoodz reaffirmed prospectus forecasts in February, but issued a profit downgrade in April, saying it would miss net revenue and EBITDA forecasts for the year to June 30. Net revenue would be $146 million to $148 million, not $149.9 million, it said, while EBITDA would be $1 million to $2 million, rather than $2.9 million.
While Youfoodz’s direct-to-consumer/home delivery business thrived during the pandemic, its business-to-business or retail operations went backwards.
Youfoodz founder and CEO Lance Giles…the board has unanimously recommended that shareholders accept the offer. Supplied
The Youfoodz board has unanimously recommended that shareholders accept the offer and vote in favour of the scheme, in the absence of a superior proposal and subject to the independent expert concluding the offer is in their best interests.
RGT Capital, Youfoodz’s largest shareholder, which came to the company’s rescue in in 2019, intends to vote its 57.4 per cent stake in favour of the scheme in the absence of a rival offer.
About $25 million of the proceeds from the IPO were used to repay a loan from RGT Capital, which was taken out to pay tax debts and restructure the business.
The acquisition will increase HelloFresh’s ready-to-eat manufacturing capabilities and expand its total addressable market.
Youfoodz shares soared 78 per cent to 90.7¢ and Marley Spoon shares rose 5 per cent to $2.96.
Mr Rutledge said the acquisition was a natural next step for the company, which is listed on the Frankfurt stock exchange.
It would enhance HelloFresh’s Australian brand portfolio and product offering and combine its expertise in direct-to-consumer marketing, supply chain management and technology with Youfoodz’ strength in developing, manufacturing and distributing ready-to-eat meals.
“Youfoodz’ complementary product and capability backed by a well known brand and highly capable team will allow us to serve more meal occasions to more people,” he said.
Youfoodz is being advised by Greenhill & Co and Baker McKenzie, while HelloFresh is being advised by Clayton Utz.