HIGHLIGHTS
Under the terms of the Agreement (which is dated 1 October 2024), Hydralyte US will receive consideration of US$8.25m plus the value of stock and prepaid inventory in the relevant jurisdictions, valued at approximately US$1.2m (subject to post-completion adjustments). The final cash consideration, including stock and prepaid inventory, is expected to be approximately US$9.5m (A$13.7m).
All conditions precedent to completion of the Agreement have been satisfied and the Agreement will complete in the coming days.
The Company has also agreed a Transition Services Agreement with Prestige, which covers the period of operational transition, and certain other related agreements.
With the funds received from the sale, the Company will repay its existing A$8.2m debt facility owed to Pure Asset Management (refer ASX announcement: 27 March 2024), with the remaining cash at bank to be used towards closing and restructure costs and advancing operations in the US market. The Company is focussed on achieving scale and cashflow breakeven in the US, targeting profitability in the future.
Use of Funds:
Rationale:
On 27 March 2024 the Company announced that it intended to seek a sale transaction. Since that time, the Board has considered a range of options to divest part or all of the Company’s business.
The Board considers that the Prestige transaction will effectively deleverage the Company’s balance sheet and provide Hydralyte US with an opportunity to pursue its growth strategy in the potentially lucrative US market for the benefit of shareholders. This US growth strategy will be underpinned by a significant increase in balance sheet strength, with no debt and a stronger cash position to flexibly pursue targeted opportunities for sales and margin growth.
Streamlined operations:
Hydralyte US will focus on driving growth and unlocking value from its US-based assets. At present, Hydralyte US’s operations are annualising net revenues of approximately US$3.8m on an unaudited basis based on Q2 FY24.
The Company will maintain a presence with American bricks and mortar retail outlets but its targeted growth strategy in the US market will focus on ecommerce channels, where it already has an established footprint.
Most recently, the Company has achieved considerable net margin growth since Q1 CY23. Further, Amazon USA has achieved five consecutive months of positive net contributions and margin growth.
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