Vitamin and supplements manufacturer Star Combo Pharma (ASX: S66) has agreed to pay $10 million to acquire the retail operations of Koala Mall Pty Ltd and Austoyou Group Pty Ltd in an effort to boost its sales into China.
Austoyou is a well-established, Australia-to-China e-commerce platform offering more than 5,000 high-demand product lines to Chinese health product consumers.
The e-commerce platform provides Star Combo with an opportunity to significantly increase product sales and accelerate its China growth strategy.
It will also allow Star Combo to enhance its product lines to meet changing customer demand trends.
The Koala Mall business will offer a range of Star Combo Pharma vitamins, skincare, milk products and health supplements at a number of retail stores in Sydney.
Austoyou and Koala Mall will be acquired via a three-stage share sale and purchase agreement commencing with an immediate payment of 70% of the sale price on settlement of the acquisition, split 50:50 between cash and shares.
The remaining 30% will be split equally and paid 12-months and 24-months post-settlement.
The acquired businesses – both part of the Ausway Group of companies – delivered around $17 million in sales for the 2018 financial year and have demonstrated more than 20% per annum growth since 2016.
The growth has been attributed to increased Chinese demand for a broad range of Australian-manufactured and quality-controlled consumer goods.
China’s vitamins and health supplements market has been estimated to grow well past its current US$5.2 billion value.
Chief executive officer Su Zhang said the acquisition will allow Star Combo Pharma to capitalise on that growth and will complement its existing B2B channels into the country.
“Chinese consumers view Australian-made products as being of high quality and subject to rigorous regulation and quality control,” she said.
“The addition of the Austoyou e-commerce platform will deliver Australian-made supplements direct to the consumer in China – it is a transformational acquisition which will accelerate [our] growth plans and provide a significant near-term increase in revenue.”
At mid-afternoon, shares in Star Combo Pharma were trading 17.27% higher at $0.645.