The Asaleo Care (ASX: AHY) share price is jumping around today after the company announced a new acquisition agreement. Here’s the lowdown.
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Asaleo Care Ltd (ASX: AHY) shares jumped 0.4% higher on open, before falling 1.1% only to rebound and retrace again. At time of writing, the Asaleo share price is down 0.3%.
The moves in the Asaleo share price come after the personal hygiene company announced a new acquisition agreement along with updated advice to shareholders on Essity‘s takeover offer. That offer was delivered earlier this month.
What was announced?
In this morning’s ASX announcement, Asaleo reported it has entered into an agreement to acquire TOM Organic for $12.75 million in cash. TOM Organic produces a range of organic feminine hygiene projects.
Asaleo expects the business to align well with its own Libra brand of feminine care products. The company stated it is well placed to grow the presence of TOM Organic products in markets where it already has a strong presence.
Asaleo forecasts that the transaction will be immediately accretive. It expects first year net revenue of at least $11 million and underlying earnings before interest and tax (EBIT) of $1.7 million. Once scale and supply chain benefits fully materialise in the second year, it forecasts EBIT of $3.5 to $4 million.
Commenting on the acquisition, Asaleo Care’s CEO Sid Takla said:
TOM’s much-loved brand, sustainable product range, innovation pipeline, and digital and e-commerce capabilities align strongly with the company’s strategy to operate in higher growth, higher margin personal care categories. TOM Organic delivers profitable product diversification and significant additional financial benefits by leveraging our existing scale and supply capabilities.
In updated advice on the takeover offer received from major shareholder Essity on 10 December to acquire all of Asaleo Care’s ordinary shares, the company reported that a board committee of independent directors, excluding Essity nominated directors, is considering the proposal.
Asaleo Care Chair Harry Boon said:
Our Board Committee is carefully reviewing the Essity proposal and expects to be in a position to comment further early in the new year. Prior to then, shareholders are advised to take no action. Meanwhile, today’s announcement of the acquisition of TOM Organic reflects our commitment to creating long-term value for our shareholders through our strategic growth plans, including sensible acquisitions that take advantage of our scale and core capabilities.
Asaleo Care share price snapshot
After a turbulent year, which saw the Asaleo share price fall 22% over two weeks in March during the wider COVID selloff, the company’s shares really blasted off on 10 December following on Essity’s takeover offer.
As of this morning, the Asaleo Care share price is up 33% since the closing bell on 9 December and it’s now up 27% year to date. For comparison the wider All Ordinaries Index (ASX: XAO) is up 1% in 2020.
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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.