Management are looking for $16 share price down the track and have already been offered a bid.
Wattle Health [ASX:WHA], an Australian infant formula producer, has rebuffed takeover and investment approaches from Chinese companies to grow independently after completing vertical integrations, Executive Chairman and co-founder Lazarus Karasavvidis said.
The AUD 225.62m (USD 167.06m)-market cap company, based in Victoria, could look to do more joint ventures (JV) after entering into a JV with Organic Dairy Farmers of Australia to construct an organic spray drying facility in April, as long as the potential partnership could bring a complementary value, the chairman said.
The company is always talking with other parties, he continued. For example, if someone came and said that they have a perfect cereal product for babies, that could interest Wattle Health to do a JV with, Karasavvidis said.
Apart from the aforementioned JV, the company acquired a 5% stake in Australia-based Blend And Pack, a provider of blending, packaging and distribution of infant formula, in September 2017, according to an investor presentation this May. Separately, it also acquired Little Innoscents Organic Skincare company in February to complement its product offering, Karasavvidis said.
Following these deals and integration's, Wattle Health is currently the “only one” vertically integrated organic milk company in the world, according to the chairman.
With no M&A plans, the company is looking to grow revenue significantly with contracts already in place to generate revenues of AUD 130m, he said. It recorded gross sales of AUD 804,379 for the March 2018 quarter, according to a stock exchange announcement.
The company is expecting growth to come from both local and overseas markets, such as China, Singapore, Malaysia, India and Vietnam, he said. It sells in bricks and mortar stores as well as online and has strong social media initiatives to drive further growth, he said.
The company has recently done some agreements with undisclosed parties in Singapore and Malaysia, the chairman said, declining to elaborate further. There will be announcements regarding those markets soon, he added.
Partnership with Mason Financial
Since its launch, the company has been strongly supported by Mason Financial Holdings[HKG:0273], the chairman noted. Mason has invested in the company prior its initial public offering and was a major co-investor in Blend and Pack acquisition, he said. Mason through its private equity arm Brilliant River had stake of around 5% according to its annual report last year, but it has ceased to be a significant holder according to an ASX filing on 19 June.
When Blend and Pack come to the market through PwC around March 2017, Wattle Health introduced the target to the Hong Kong partner as it was not able to fund the AUD 100m deal on its own, Karasavvidis said, noting that Wattle Health listed around that time. Therefore, Mason took a 75% stake while Wattle Health bought a 5% equity interest, with the rest held by the original shareholders of Blend and Pack.
Wattle Health also received an AUD 20m loan facility from Prospere Advisory Limited, a private equity fund that was seeded by Mason Group Holdings, according to the company’s investor presentation. Mason Financial also helped Wattle Health to expand sales by putting the products on Aiyingdao (AYD), a South China-based mother-infant-child products retailer owned by Mason, the chairman said.
Karasavvidis, who remains as a major shareholder with a 22% stake, said he is not planning to reduce his stake. He has committed some AUD 4m of his personal funds in total so far and believes in the company’s success, he said. He could only consider any sale if someone offered a significant offer such as AUD $16 a share
AUD $16 a share, the chairman said. The company is trading at AUD 1.16 a share today (4 July).
Although Bellamy's Australia [ASX:BAL], Bubs Australia [ASX:BUB], a2 Milk Company [ASX:A2M] are the company’s peers they are not its competitors, the chairman said. Bellamy’s and Bubs are using ingredients from Europe, while a2 is a New Zealand company, he continued.
There are 20 people working in the company, the chairman said.
K&L Gates is the company’s legal firm and William Buck is its auditor.
Founded in 2011, the company produces a range of products, including milk formula and baby foods, according to its website.
by Gabriele Rutkauskaite in Sydney
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