ONLINE action-wear retailer SurfStitch (ASX:SRF) has extended its global reach and boosted digital distribution channels through two acquisitions totalling $21 million.

The Burleigh-based SurfStitch has bought online surf forecaster Magicseaweed and online surf publisher Stab Magazine in separate deals that are expected to boost revenue and enhance margins over the next 12 months.

The deals will comprise $13.8 million in cash and 4.8 million in shares, worth about $7.2 million at current market levels.

The cash component is being funded through a $42.5 million capital raising, comprising a $37.5 million share placement and $5 million share purchase plan for existing shareholders, which represents 11.7 per cent of the company's issued capital.

The share offer is pitched at $1.50 per share, which is just below the company's most recent share price of $1.55.

The news comes as SurfStitch reaffirms its FY15 revenue and EBITDA forecast of $199 million and $7 million respectively. It says the latest acquisitions will add marginally to this financial year's result.

The Sydney-based Stab, which was established in 2004, attracts 750,000 unique monthly visitors to its website which has developed a reputation as a trusted source of surfing news and product reviews through strong relationships within the surfing industry. 

The UK-based Magicseaweed is the world's oldest and biggest long-range surf forecaster monitoring more than 3000 beaches in 180 countries. It is used by contest directors in some of the world's biggest surfing tournaments and attracts about two million unique monthly visitors to its website.

SurfStitch CEO Justin Cameron describes the acquisitions as a key step to creating an "integrated, digital ecosystem" that will drive growth through a closer engagement with its core customers.

He says the move is also aimed at keeping abreast of a digital environment that remains in a constant state of flux by capturing and influencing customers "at all points of the surf and action sports lifestyle cycle".

"These businesses share our enthusiasm and passion in the action sports and youth culture space, and are ideal partners to support SurfStitch's mission to become the global destination for action sports and youth lifestyle content and online retail," he says.

"Combined with our recent launch of The Lens (social network initiative), the acquisitions will further SurfStitch's global content-driven strategy to provide relevant and engaging content to our growing active customer base.

"Customer engagement is a key focus of SurfStitch. In an ever evolving digitalised world, where our target demographic is spending more time across different screens, platforms and networks, there is an increasing need to find new and relevant ways of attracting and engaging with potential customers.

"Traditional mediums of marketing, even digital advertising, are becoming less effective with over 71 per cent of internet users ignoring online banner ads, and over 58 per cent ignoring online search engine ads.

"The acquisitions represent an important strategic step for SurfStitch in developing an integrated, digital ecosystem and positioning the business for future growth."

Magicseaweed co-founders Ryan Anderson, Ben Freeston and Nicholas Lott will continue to work with the company following the acquisition which Anderson says will facilitate expansion in the US, Australasia and Europe.

"It's a unique opportunity to find the right balance of surf forecasting, inspirational content and product offerings to our global surf community and millions of users," says Anderson.

Both Magicseaweed and Stab have what SurfStitch calls a "highly engaged audience" with 90 to 95 per cent of visitors returning to the sites within seven days.

"Stab's success has always been about big names and big ideas," says co-founder Sam McIntosh, who also will remain with the business. "From working with the best athletes to creating viral projects that breathe and bleed on screen, we share SurfStitch's vision for an international content network and connecting our core audience daily."

Meanwhile, the fully underwritten institutional placement has been launched today to fund the $13.8 million cash component of the deals. The $37.5 million share issue, due to take place on May 19, will provide surplus funds for SurfStitch to pursue further acquisitions.

The separate share purchase plan provides existing shareholders the opportunity to acquire up to $15,000 worth of SurfStitch stock.

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