Adairs (ASX: ADH) has lobbed a bid for online home and living retailer Mocka for $75.5 million in what Adairs chief executive officer and managing director Mark Ronan claims is a “highly complementary and attractive acquisition”.
According to Adairs, Mocka is a “highly efficient” and profitable online retailer with a strong track record of growth, attractive margins and cash generation.
Established in 2007, Mocka was a family owned business with sales starting in baby, kids and nursery products before expanding to sell household and furniture items as well.
Mocka owns two distribution centres to ship its products from including one in Brisbane, Queensland and another in Christchurch, New Zealand.
Commenting on the acquisition, Mr Ronan said the companies had “shared DNA” because they both design and develop in-house enabling them to offer customers “high quality design-led value for money”.
“Importantly, this also means we have significant control of the vertical supply chain and in market pricing.”
Mr Ronan added the benefit for shareholders was a more diversified business with increased exposure to “fast growing” online sales.
“Our online sales will increase from 17% of total sales in FY 2019 to almost 30% on a pro forma basis after normalising for a full year’s contribution from Mocka in FY 2020.”
Mr Ronan pointed out in addition to being highly profitable, Mocka had low recurring capital expenditure requirements and lease commitments.
“The acquisition is expected to deliver normalised earnings accretion of approximately 10% in FY 2020 (pro forma, with no synergies assumed).”
At this stage, Adairs will leave Mocka to operate as an independent business – keeping its existing management team which has successfully built the company.
Adairs plans to fund the takeover through a combination of debt facilities and shares.
The first $49.1 million will be paid at settlement later this month, with a further $5.7 million to be paid in Adairs shares and the remaining $43 million to be paid in cash.
Adairs share price rocketed more than 16% in early morning trade to reach $2.06.