Moa asks for cash to buy hospo group for up to $21.4M

Friday 21st December 2018

Unprofitable beermaker Moa Group will ask shareholders for more money next year to help pay for what could be a $21.4 million acquisition of bar and restaurant owner Savor Group.

Moa may need to work hard to convince shareholders to approve the deal, given its value relative to the beermaker's $24.7 million market capitalisation. It will need to raise at least $7.8 million in cash upfront. The NZX-listed company held cash and equivalents of just $793,000 as at Sept. 30 and had burned through cash with an operational outflow of $2.6 million during the preceding six months.

Moa raised $2.7 million through a private placement in July. Executive chair Geoff Ross told shareholders in August the company wouldn't need to raise more money in the foreseeable future.

Today, it said it expects to provide details on a proposed rights issue next year, which will help fund the acquisition alongside bank debt and new equity.

The conditional agreement is for Moa to pay $13 million up front for Savor Group, of which 60 percent would be in cash and 40 percent in shares.

Moa posted an ebitda-loss of $2.1 million in the year ended March 31, and a $1.2 million loss for the six months through September. It is aiming to break-even for the current half-year.

It says the Savor purchase would add $3.6 million of operating earnings in its first full financial year.

Should "mutually agreed" business growth strategies be achieved after 12 to 24 months, Moa says an additional $5.4 million would be paid in cash and shares.

A further $750,000 to $3 million is available in shares if the acquired business can deliver $4-6 million of average earnings before interest, tax, depreciation and amortisation during the next two years. If it doesn't reach $3 million, Moa has clawback provisions for $750,000 to $3 million of shares.

Savor Group owns a collection of bars and restaurants in Auckland. It has also just opened three eateries and a bar in the new Auckland Fish Market. In November Moa said it would be the exclusive craft beer and cider supplier for the complex.

"Whilst we have seen strong growth in supermarkets, a vital channel for us to add is bars and restaurants," Ross said in a statement today. "We not only see the opportunity to grow the Moa brand, but also to further build hospitality venues together."

Savor Group founder and former advertising executive Lucien Law will join Moa as an executive director, as will Savor's Paul Robinson, an investment banker.

Moa has struggled since its 2012 initial public offering, when it sold shares at $1.25 apiece, raising $15 million to expand its Nelson brewery. That expansion was blocked and it outsourced production to nearby McCashin's Brewery.

The beermaker had issues with its then-distributor Treasury Wine Estates the following year, dumping them for failing to meet new targets. After several years of direct distribution, it decided more recently to team up with Constellation Brands on distribution.

Past forays touted as major growth drivers have been tapping international markets in the US and alternatively China.

The issue price for the proposed deal will be a 20-day volume weighted average prior to settlement, and at today's price of 41 cents, would amount to 12.7 million shares being issued for the base component, or about 21 percent of the existing stock on issue.

(BusinessDesk)

Comments from our readers

No comments yet