EVE Investments (ASX: EVE) emerged out its trading halt earlier today to announce that it intends to acquire the entirety of organic tea tree oil producer Jenbrook for around A$2.9 million from its founder and sole shareholder, Bryan Easson.
EVE also said it intends to pay $272,040 and issue 30.2 million shares to “extinguish existing management loans.”
The deal still requires shareholder approval under current listing rules but is expected to be a formality at EVE’s upcoming shareholder meeting, sometime before September 2018.
Jenbrook is an established, certified organic tea tree farm in the Northern Rivers Region of New South Wales in Australia. It owns two flourishing plantations – Jendale, a 1,147-acre old growth tea tree plantation, along with Robyndale a 1,000-acre plantation used in the production of organic tea tree oil for distribution throughout the US and Europe.
In addition, Jenbrook has a 49% holding in distributor Naturally Australian Products (NAP), a preeminent distributor of natural extracts and oils into the United States.
On completion, Jenbrook and NAP will appoint Mrs Robyn Ingersole, a current employee of both companies, to act as Chief Executive Officer of both companies.
Robyndale is particularly unique because it is situated at the heart of the ‘Bungawalbyn Valley Basin’, an area often described as the “origin of the tea tree species.”
Through its two tee tree plantations, Jenbrook harvests and sells tea tree oils, extracts and products to NAP. However, it also sells its products to third-party international customers.
Jenbrook reported unaudited revenues of $2.1 million for past financial year from its tea tree products, with a further unaudited contribution of US$1.5 million from NAP.
“The acquisition of Jenbrook will be an important step for EVE in terms of establishing a revenue base with tremendous growth opportunities and importantly it creates a strong working synergy with Meluka Honey and the opportunities being pursued with The Hydroponics Company (ASX: THC).”
THC is a medicinal cannabis developer who recently signed a binding term sheet with Jenbrook and Meluka Health to create a de-facto trilateral agreement that will see all three companies benefitting from each other’s specialities. EVE Investments owns 50% of Meluka Health and therefore assumes a central role in the trilateral relationship.
Today’s news that EVE will be acquiring Jenbrook further bolsters its reigns on the deal.
“By having ownership of the Jenbrook assets, EVE can exercise greater control over expansion plans for the Jendale plantations whilst EVE’s shareholding in NAP will assist with accelerated sales growth for both the Jenbrook and Meluka Honey suite of products,” said Ben Rohr, investment director at EVE Investments.
The Jenbrook acquisition effectively expands EVE’s portfolio into the global organic essential oil, hydrosol and botanical extract market that is growing at a compound annual growth rate of 11%.
As a leading producer, Jenbrook currently sells 100% of its annual production and is targeting a material increase in production over the next 1-2 years.
By securing a substantial stake in NAP, EVE can therefore benefit across the entire supply chain ensuring maximum exposure to this growing global demand.