A Manly-based entrepreneur whose dietary program has helped a community of more than 1.5 million mothers is set to cash in after reaching an agreement to sell her business The Healthy Mummy Holdings to Halo Food Co. (ASX: HLF) for $17 million in cash and scrip.
The binding agreement for the business also includes earn-out considerations if certain financial targets are hit, which in the best-case scenario would be $4 million worth of shares and $1 million in cash for founder Rhian Allen.
Allen, who founded the business after being pregnant with her first child in 2010, will stay on as CEO.
"I am so excited to be able to join forces with Halo Food Co. and take The Healthy Mummy to a new level with a highly accredited and entrepreneurial partner," Allen says.
"By partnering with a world class health and wellness brand owner, developer and manufacturer in Halo, The Healthy Mummy will be able to accelerate the development of innovative and first to market nutritional products and increase our distribution of products across multiple retail channels.
"Our incredible community of mums and their entire family are always our first priority and the acquisition and partnership with Halo, will only allow us to serve mums better."
Allen describes The Healthy Mummy's offerings as holistic with three key verticals: food and products (smoothies, snacks, supplements, skincare, books and merchandise) which account for 61 per cent of revenue; a digital subscription via the company's app that generates 39 per cent of revenue, providing a nutritionist, personal trainer and motivational coach; and an engaged community which the group claims is one of the world's largest with 1.9 million Facebook followers.
It is a business model that generated $21 million in revenue and $4 million in normalised EBITDA in FY21, supported by 86,000 digital subscribers of whom a large portion are recurring.
To receive her full potential earn-out, Allen will need to lead the business to notch $25 million in sales in the current financial year with earnings above $5 million, and lift that to $30 million revenue and $6.5 million in earnings in FY23.
Halo Food Co listed on the ASX in July 2018 under its former name Keytone Dairy Corporation with a share price of $0.20, shooting up briefly to almost $0.80 per share before declining steadily over time to $0.13 at the market's close yesterday. Investors have not responded warmly to today's news with shares plummeting a further 23 per cent to $0.10 at the time of writing.
With a market capitalisation yesterday of $35.6 million, the acquisition announced today represents around half that value of the to-be parent company. This will be backed by binding commitments for a placement of $3.5 million, and a share purchase plan (SPP) worth up to $3.5 million.
The $17 million itself will go to the target company's owners Allen and Whiteoak Pty Limited, comprising $10.84 million in cash and $6.17 million in shares, calculated at the 30-day volume weighted average price of $0.1196 per share prior to the acquisition announcement.
Known for its brands such as KeyDairy milk powders, Super Cubes ready-to-eat meals, functional beverage Tonik and Gran's handcrafted fudges, Halo is entering new territory through its tie-up with Rhian Allen. CEO Danny Rotman describes the acquisition as "transformational, highly complementary and financially compelling".
"The Healthy Mummy is an established, profitable and cash generative business, with strong digital distribution channels and metrics focused on the health and wellness of mothers," Rotman says.
"The business is a natural fit to the existing Halo business, increasing the lifetime value of customers to the group and adding high margin digital distribution channels and cross-sell capability that would otherwise take years to establish organically.
"I am excited to welcome Rhian Allen as CEO of The Healthy Mummy to the Halo group and look forward to the strength of the combined business moving forward and the value this creates for shareholders."
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