Trilogy International, the scented candle and beauty products maker grappling with rising raw material costs, will spend $13.8 million buying control of smaller rival Lanocorp's New Zealand and Australian businesses.
Auckland-based Trilogy will pay $12.5m upfront in cash for 80 per cent of Lanocorp New Zealand, whose suite of beauty products include Lanocreme, By Nature and Tiaki, with two further payments tied to earnings targets. It also has a call option to buy the remaining 20 per cent after three, four or five years. Trilogy said it has also conditionally agreed to buy Lanocorp's affiliated Australian business for a further $1.3m.
Christchurch-based Lanocorp "gives us geographic diversity with greater exposure to the US market and allows us to pursue products and channels outside the reach of our current portfolio," chairman Grant Baker said in a statement. "The acquisition provides further scale for TIL as we leverage our proven success with growing brands locally and in key international markets."
Trilogy lifted annual earnings 19 per cent to $19.4m in the year through March 31 with a full year's contribution from distributor CS & Co and stronger sales from its beauty product range offsetting more expensive raw materials. Those rising costs are expected to continue, although Trilogy has previously said it expected earnings to keep growing in the 2018 financial year.
The company today said it expects Lanocorp to boost earnings, showing up in the first-half and annual results for the year ending March 31, 2018. Lanocorp generated earnings before interest, tax, depreciation and amortisation of $2.4m in the 12 months ended March 31, 2017, on revenue of $10.3m.
Trilogy will fund the acquisition with existing banking facilities, having repaid $26.8m of debt in the 2017 financial year. As at March 31, it had drawn down $7.6m of a $21.5m facility and another $18m interest-only funding line was untouched at balance date.
Lanocorp managing director Tim McIver will stay on with the business and report to a Trilogy sub-board made up of directors Stephen Sinclair and Grant Baker and chief executive Angela Buglass. Companies Office documents show McIver is the controlling shareholder with 99 per cent, held in a parcel with accountant Noel Watson. The rest of the shares are owned by Jerome and Suzanne Blakely.
Trilogy shares last traded at $2.05 and have dropped 32 per cent so far this year.