- Consumer products group buys Liberty Flights
- Deal expected to be immediately earnings enhancing
- Boosts presence in the fast-growing pod system market
Shares in Supreme (SUP:AIM) rallied 2.5% to 135.3p after the consumer products supplier announced the acquisition of UK vaping products maker Liberty Flights for an initial £7.75 million.
Said to be ‘immediately’ earnings enhancing, the strategic deal not only enhances Supreme’s vaping customer base and cross-selling potential, it also brings access to the increasingly popular pod-system vaping market via Liberty’s Dot Pro range.
VAPING BUSINESS TAKES FLIGHT
The UK’s largest battery and lighting distributor and a leading name in the e-cigarette and vaping market known for its ownership of the 88Vape brand, Supreme is buying Liberty Flights for an initial consideration of £7.75 million.
A deferred sum of £2 million and performance-related earn-outs take the total potential consideration up to £14.75 million.
Founded in 2010, Liberty Flights is best known for its eponymous vaping brand as well as the Dot Pro device and sells these products to convenience retailers and increasingly, direct to consumers online.
In the year to January 2021, Liberty Flights generated earnings before interest, tax, depreciation and amortisation of £1.5 million on sales of roughly £9 million.
Funding the deal from its £25 million HSBC revolving credit facility, Supreme, whose retail customers span everyone from B&M, ASDA and Poundland to Sports Direct and SPAR, insisted the acquisition is in line with its strategy to ‘support a tobacco free UK by offering both credible and safer alternatives for nicotine consumption’.
COMPELLING COMBINATION
As CEO Sandy Chadha explained: ‘The combination of Liberty Flights and Supreme’s existing vape offerings couldn’t be more aligned and is highly complementary across our respective manufacturing, product, and customer profiles.
‘In addition, the acquisition further builds on our significant market reach in the UK, accelerating our product presence in the fast-growing pod system market, a sizeable growth opportunity for Supreme.’
TEMPORARY INFLATION PAIN
Shares in Supreme are recovering from a share price slump triggered by a warning in April that performance will be ‘tempered’ by commodity price inflation within its sports nutrition and wellness division, with the company also feeling the pinch from rising wage and transport costs.
The warning overshadowed confirmation of a strong performance from Supreme in the year to March 2022.
When results see the light of day in July, Supreme expects to report sales north of £130 million (2021: £122 million) and growth in adjusted EBITDA from £19.3 million to ‘no less than’ £21 million.
