Bubs buys NuLac to drive expansion in domestic and China goat milk sector
The infant food manufacturer now has a near-50% share in NuLac's processing facilities, which includes a plant in Melbourne and a farm in west Gippsland.
NuLac also owns the Coach House Dairy and Caprilac brands, the latter of which produces goat's milk powder and yogurt for adults that are stocked by major supermarkets.
Other aspects of the deal include NuLac's IP and brands, sales and marketing, and the option to buy the Australian farm-operating company and its related goat farms.
Higher confidence, lower risk
Bubs CEO Nicholas Simms said that through this deal, Bubs will receive exclusive access to 6.2 million litres of milk yearly from approximately 8,500 goats in Australia and New Zealand.
He told Australian media, "Clearly, securing access to such an important key ingredient will increase market confidence and mitigate regulatory risk."
He added that Bubs' control of the goat herd milk supply was a "major strategic advantage" for the company, especially in terms of supply chain management.
Bullish on China growth
Regarding China, Simms said, "The combined strength of the organisations will deliver a highly compelling proposition and accelerate our collective growth in our domestic markets, and in China and South East Asia."
He also said the deal would give Bubs "an unrivalled provenance story", appealing to Chinese customers who tend to be especially interested in the source and domestic success of overseas products.
Already, despite China driving less than 25% of Bubs' sales, the company's growth rates in the country are nearly triple that of its domestic sales.
Busy with business
During a two-day trading freeze, Bubs raised $15m through an institutional share placement to fund the its purchase of NuLac; subsequently, Bubs' shares were reported to have risen by up to 8%.
The company resumed trading on Friday, buoyed by investor support of its business strategy. It intends to raise an additional $5m via a share purchase plan at 60 cents per share (matching the share price of its institutional share placement).
Currently, the Australian market accounts for 75% of Bubs' sales; the rest comes from overseas, with the Chinese market responsible for the bulk of its offshore sales.