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Pet services business Mad Paws (ASX: MPA) is building out its pet healthcare products business with the acquisition of Pet Chemist Online for $25 million.
Announced today, Mad Paws says it has raised $5.6 million for the 100 per cent acquisition of the Tweed Heads business, and will launch a share purchase plan in the coming days to bag further $1.5 million.
Pet Chemist Online, an online supplier of pet medication sold via petchemist.com.au, achieved $9 million in gross merchandise volume in FY21, alongside $5.4 million in operating revenue, and its earnings broke even.
Mad Paws says it will get access to Pet Chemists’ 44,000-strong base of active customers, with 64 per cent of monthly sales being repeat customers.
“The combination of Mad Paws and Pet Chemist creates a dominant market leader in online pet medication and premium pet healthcare products with significant growth potential,” MPA co-founder and CEO Justus Hammer said.
“We are delighted to welcome the Founders of Pet Chemist, Howard and Mel, and the rest of team to Mad Paws and look forward to accelerating the combined Group’s growth and performance.”
The deal comprises $20 million in upfront consideration, of which $14.5 million will be fully paid Mad Paws shares.
Earnout consideration of up to $5 million is also on the table, based on satisfaction of certain revenue performance hurdles in FY23 and FY24.
Post-acquisition, Pet Chemist founder Howard Humphreys will continue to be the CEO and will be appointed to the board of directors of Mad Paws.
The share sale agreement for the acquisition is subject to a number of conditions, including shareholder approval. The company says it intends to convene an extraordinary general meeting to be held in late March 2022, at which shareholders will vote on the proposal.
In conjunction, Mad Paws says it has received binding commitments from new and existing investors to raise $5.6 million at $0.18 per share.
Approximately 31.06 million new shares will be issued under the placement which is supported by chairman Jan Pacas, MD Hammer and non-executive directors Vicki Aristidopoulos and Mike Hill who are all chipping in $90,000 as a collective, giving them 500,002 new shares.
The proposed SPP will also be issued at $0.18 per share to raise up to $1.5 million.
It comes alongside the release of MPA’s results for the December half, demonstrating a 231 per cent increase in operating revenue to $3.3 million.
However, despite pet sitting bookings more than doubling during the period, MPA is still loss making.
The company’s latest net loss after tax for the half was $2 million better than 1H21 though, coming in at $4.8 million.
The company has a positive outlook for the second half, and says it has sufficient capacity to fund its strategy with $8.8 million in cash on hand at 31 December 2021.
Shares in MPA are down 5 per cent to $0.19 per share at 12.02pm AEDT.
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