Plans by organic weed killer company Certified Organics to buy online retailer New Zealand Nature Co have been labelled a back-door listing of the e-commerce company.
Macquarie Equities investment director Arthur Lim said the $5 million price tag for NZ Nature sounded reasonable.
"It is effectively a back-door list for
NZ Nature and NZ Nature is the profitable vehicle.
"This gives the company [Certified Organics] a good platform to work through to commercial viability."
Certified Organics will buy the privately owned company for $3 million in cash and $2 million in Certified Organics shares valued at 6c a share. The purchase will be funded by a share placement, rights issue and borrowing.
Nelson-based NZ Nature generates more than $4 million annual revenue and pre-tax earnings of $1 million.
Certified Organics managing director David Warrick said it was a good company at a good price. "Most public companies would be delighted to put a cash generative growth opportunity in front of their shareholders at less than five times historic pre-tax earnings."
Warrick said the management strategy for NZ Nature would be "evolution not revolution".
"This is a good business with some real strengths ... we don't want to throw the baby out with the bath-water by changing too much too fast."
NZ Nature sells clothing, cosmetics, health products, energy saving products, educational toys and Kiwiana via the internet to a 50,000- strong customer base.
About 50 per cent of sales are exported, primarily to North America.
Warrick said access to an established online distribution channel was an important but secondary benefit. Although best known for its organic weed killer, Certified Organics has a range of personal care products including shampoo and hand soap.
"There's certainly a possibility of taking some of those products we've developed ... and using their [NZ Nature's] catalogue and email customer list. It's certainly a great way to test these products."
Certified Organics will fund the acquisition with a fully subscribed $400,000 share placement and a $3.2 million one-for-two rights issue, of which up to $1.5 million is expected to be underwritten.
The share placement and rights issue will be at 5.5c a share with attached options.
This month, Certified Organics said sales of $118,000 for the first quarter were up 96 per cent on the same period last year.
