Brisbane-based prepared meals company YouFoodz (ASX: YFZ) has today given Australians a cautionary lesson in initial public offering (IPO) investing, with the board recommending a buyout from Berlin-based Hellofresh at a 38 per cent discount to the listing price just seven months ago.
In late 2020 the group founded by Lance Giles raised $70 million towards a new purpose-built, semi-automated manufacturing facility, paying off a loan to majority shareholder RGT Capital, corporate costs and an aggressive marketing campaign.
Market scepticism was immediate with YFZ shares falling from their listing price of $1.50 to $1.05 each in their first day of trading in December. It has been a steady decline ever since, exacerbated by a 31-65 per cent cut to earnings forecasts for the 2020-21 financial year.
Today Youfoodz is biting the bullet with the board and RGT Capital, which owns 57.4 per cent of shares, in favour of a scheme of arrangement whereby Hellofresh would buy 100 per cent of the group at $0.93 per share.
The board has highlighted Hellofresh's offer as an 82 per cent premium to the last closing price of $0.51 and a 109 per cent premium to the one-month volume weighted average price of $0.44.
For IPO participants however, the deal would represent the crystallisation of significant losses with Youfoodz' total value cut by $62.6 million from its indicated value in the prospectus, for which a limited assurance review, but not an audit, was conducted by KPMG.
The accounting firm did audit Youfoodz' financial statements for the preceeding two financial years, noting ''material uncertainty relating to going concern".
The Youfoodz board unanimously recommends that Youfoodz shareholders vote in favour of the Hellofresh scheme in the absence of a superior proposal, although this position depends on an independent expert concluding the deal would be in the best interests of shareholders.
A scheme booklet is expected to be sent to Youfoodz shareholders in September 2021 with a vote planned in October and the intention to implement the scheme either that month or in November.
Hellofresh views the intended acquisition of Youfoodz as another step in its strategy to become the leading global D2C (direct-to-consumer) food solutions group.
"We are very excited to welcome Youfoodz and its CEO Lance Giles to our group," says HelloFresh Australia and New Zealand CEO Tom Rutledge.
"We are impressed by Youfoodz' strong product and manufacturing capabilities and are looking forward to jointly delight Australians with delicious, healthy and convenient 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."
Hellofresh CEO Dominik Richter highlights good opportunities to strengthen the group's position in the growing, ready-to-eat services sector in Australia.
"Following the successful acquisition of Factor in the US, we consider the intended acquisition of Youfoodz and the expansion of our ready-to-eat offering an important component of our growth strategy," says Richter.
The total purchase price for the acquisition is approximately 125 million according to Hellofresh, and will be paid from cash on its balance sheet.
Giles reiterates Youfoodz' mission has always been to provide Aussies with access to fresh and healthy ready-made meals, snacks and drinks that easily adapt to their lifestyles.
"Since our inception in 2012, we are proud to say that we have delivered over 60 million ready-made meals to our home delivery, retail and corporate customers," says Giles.
"We are excited about the prospect of joining the HelloFresh group. This is a significant endorsement of our brand and the success we have enjoyed as a business in the ready-made meal sector.
"Partnering with a global leader like HelloFresh will help us accelerate growth of our business and enhance our customer offering through new menu offerings, customer initiatives and enriched service levels."
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