Keytone Dairy eyes China with Omniblend acquisition
Omniblend is an Australian product developer and contract manufacturer of health and wellness powdered and UHT drinks products.
Omniblend, which holds numerous accreditations, including from the Certification and Accreditation Administration of the People's Republic of China, expects revenues of A$29.7m (US$20.4m) and EBITDA of A$2.244m (US$1.54m) for the 30 June 2019 year.
The purchase price consists of A$10m (US$6.9m) in Keytone shares to Omniblend vendors, A$8m (US$5.5m) in cash on completion plus the settlement of Omniblend’s existing debt of up to A$4.6m (US$3.2m); plus an issue of performance shares convertible into Keytone shares dependent on substantial increases in Omniblend’s performance over the next three years.
Keytone’s Chairman, Peter James, said, “This is a compelling and transformational acquisition for Keytone. Omniblend is a leading Australian manufacturer in the health and wellness sector, with both dry powder and ready-to-drink dairy based product capability. Keytone is fast tracking its development and the Acquisition is underpinned by a strong strategic rationale and articulated upon our four-pillar growth strategy. Importantly, the Acquisition is highly EPS (earnings per share) accretive for Keytone’s existing shareholders.”
Varied client base
James said the acquisition offers scale and diversification to Keytone’s existing business, with a depth of product offering and manufacturing expertise and capability.
He added that the Omniblend customer base includes a range of Australian and foreign contract manufacturing clients and the combined company will be substantially diversified, both in terms of its product mix, and in terms of its geographic markets and customer base.
Omniblend’s current client base, includes OptiSlim, Carman’s, Muscle Milk and Aldi Stores. Keytone said Omniblend’s proprietary brands and private label clients can benefit from Keytone’s international distribution channels including online platforms (JD.com, Tmall, Pinduoduo) and bricks and mortar retailers, such as Metro Retail.
Keytone said the integrated company will look to implement a step change in revenue and sales mix towards high value proprietary products as it looks to continue the roll out of its proprietary brands in the health and wellness sector, in addition to growing its product offering and capability to its existing combined customer base.
“Further, the acquisition provides Keytone with an early mover advantage in the health and wellness sector into China,” James said.
“We believe that the combination of Keytone’s existing Asia and China sales channels, export-oriented brand and capital reserves, with Omniblend’s scale, breadth of product range, highly automated manufacturing facilities and proven customer relationships will produce substantial cross-sell synergies. The acquisition is also expected to produce significant cost efficiencies and operating leverage commencing in the March 31, 2020 financial year.”
Omniblend founders Danny Rotman, managing director, Arie Nudel, GM of international and business development, will join the Keytone board.
Founded in 2008, Omniblend currently employs 84 full-time staff at four sites in Melbourne, Victoria. In addition to its current third-party manufacturing business, Omniblend creates formulations for its clients as well as for its own proprietary products. Omniblend holds numerous accreditations including CNCA, Dairy Food Safety Victoria, Australian Certified Organic, British Retail Consortium (AA Grade) and Halal certified.