Bayn (Humble), Lohilo and now FRILL HOLDING!2021-04-28 13:51
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INNOVATION AND HEALTH A UNIQUE FOOD TECH PLATFORM FOR HEALTHY INDULGENCE Frill is an innovative company that has developed a unique food tech platform for the development of products within Functional foods. Frill creates healthy nutrition alternatives based on scientific evidence and avoids short-term hypes and trends. Frill is fiercely on the side of its consumers and will deliver to them affordable healthy nutrition and insight, thus enabling consumers to make their own decisions based on facts and enjoy life by having delicious products for themselves and their families.
BACKGROUND AND MOTIVE
The acquisitions of the three companies and the letter of intent are in line with the previously communicated strategy of building an expansive portfolio of brands through both acquisitions and organic growth in the fast-growing functional foods sector.
"I am very pleased that the Frill Group has in such a short time put together a product portfolio of very strong brands, which puts us in a good position to become one of the Nordic region's leading functional foods companies," says Peter Blom, CEO of Frill , and continues:
“Through a sufficiently large and fairly composed product portfolio, we will be an interesting and strong counterpart for buyers at all levels - at both the large chains and at more specialized sellers of functional foods. This allows us to expand quickly and we have eliminated the risk of a smaller company, with only a few brands / products to offer. ”
ACQUISITIONS IN BRIEF
Frill has acquired all outstanding shares in iQ Fuel AB, Kling Homie AB, and Nathalies Direct Trade AB. The total purchase price amounts to approximately SEK 71.1 million distributed through cash payment of SEK 24.1 million and payment with newly issued shares in the Company through payment in reverse of SEK 47 million, which is then set off against a total of 57,810,572 Remuneration shares. The subscription price amounts to SEK 0.813 per share in the Company. In addition, there are certain additional purchase prices.
The acquisitions and consolidation of these companies are a major step in Frill's communicated strategy to build a portfolio of strong brands in the functional foods product category.
iQ Fuel - Fast-growing functional drink without caffeine
iQ Fuel is a fast-growing Swedish company that sells sports and functional drinks, enriched with vitamins and electrolytes. The drinks are without stimulant additives such as caffeine or taurine, which means that they can be sold without an age limit. The drinks have been well received by the market since the start in 2019. The company had sales of approximately SEK 7.1 million in 2020, with a profit of SEK -8.4 million.
iQ Fuel has invested heavily and entered into important collaborations with sports stars such as Alexander Isak, Nicklas Bäckström and sports organizations such as the Hockey Allsvenskan, Swedish Floorball Association, the Swedish Padel Association, the Swedish Elite Series in E-sports and the Swedish Ice Hockey Association. iQ Fuel's products are currently sold at major players such as ICA, Coop, Hemköp, and a number of convenience stores and e-commerce platforms.
“That iQ Fuel is now joining the Frill Group feels completely right. We will be a larger organization that has good opportunities to continue to grow at an ever faster pace together with other brands within the Frill Group, ”says Paul Legemark, CEO of iQ Fuel.
Frill acquires 100 percent of the outstanding shares in iQ Fuel AB. The total purchase price is SEK 37.6 million, of which SEK 8.1 million must be paid in cash for redemption of previous loans and conditional shareholder contributions in iQ Fuel. The remaining purchase price of SEK 29.5 million is to be paid through 36,285,357 newly issued Remuneration Shares. This corresponds to a total dilution of approximately 20.5 percent. An additional purchase consideration in the form of newly issued shares in Frill to a value of SEK 8 million is paid if iQ Fuel during the financial year 2021 reaches a sales target of SEK 39.6 million. These additional purchase price shares will be issued at a subscription price corresponding to the volume-oriented average price (WVAP) for Frill's shares on Nasdaq First North for the 45 trading days immediately preceding the day of Frill's issue of the additional purchase price shares.
Kling Homie - Health-promoting and functional products
Kling Homie is a fast-growing Swedish lifestyle brand that works to optimize diet and health. The product range includes nutritional supplements, functional and energy drinks, dietary supplements and a number of other health products. The company was founded in 2018 and Kling Homies' range is sold at over 700 retailers, including some of Sweden's major e-commerce platforms and food chains. The company had sales of approximately SEK 8.7 million in 2020, with a profit of approximately SEK 0.4 million. In 2021, several new products will be launched. Sekina Kling, founder and CEO, and Fredrik Kling, founder, intend to continue operating the Frill Group.
"Frill's organization gives us the tools we need for our continued offensive venture. The journey with Kling Homie has just begun ", says Sekina Kling, founder and CEO of Kling Homie.
Frill acquires 100 percent of the outstanding shares in Kling Homie AB. The total purchase price is SEK 28.5 million, of which SEK 11 million is to be paid in cash and SEK 17.5 million through 21,525,215 newly issued Remuneration Shares. A cash additional purchase consideration is paid, based on the sales of Kling Homies products until 31 December 2025. The additional purchase consideration amounts to 5 percent of the total sales amounting to SEK 400 million and 10 percent of the part of the sales that exceeds SEK 400 million.
Nathalie's Direct Trade - Healthy and ethical snacks
Nathalie’s Direct Trade markets and markets healthy snacks that both make the consumer feel good and at the same time feel that they are doing a good deed. Nathalie's current products include dried fruit in portion bags and the range will be expanded in 2021 with several new products. In 2020, the company had a growth of 72 percent and sales of SEK 898 thousand with a profit of SEK -69 thousand. The company buys finished products directly from farmers in Colombia and thus removes unnecessary intermediaries, while strengthening farmers and local workers. Since 2017, Nathalie's Direct Trade is a member of the UN program UNDP - Business Call To Action.
“I am very happy to be part of the Frill Group. It opens up new opportunities for Nathalie's Direct Trade to scale up sales of the current range, launch new products and thus be able to make an even bigger difference for farmers and entrepreneurs in the countries of origin, according to our sustainability concept ", says Nathalie Aldana, CEO and founder of Nathalie's Direct Trade.
Frill acquires 100 percent of the outstanding shares in Nathalies Direct Trade AB. The total purchase price is SEK 4 million and must be paid in cash. A cash additional purchase price corresponding to 5 percent of the sales of Nathalies Direct Trade's products until 31 December 2026 must also be paid. The additional purchase price can amount to a maximum of SEK 7.5 million, calculated on a total turnover during the period of SEK 150 million.
ABOUT B8 SVERIGE AB AND FRILLS LETTER OF INTENT
B8 Sweden (“Beijing 8”) is a Swedish company that sells and markets dumplings and related by-products in the Nordic region, both in the retail trade and in its own restaurants. In 2020, the company produced and sold over 6 million dumplings, making it one of the largest brands of dumplings in Europe. During 2020, the company had sales of approximately SEK 32 million.
On this day, Frill has entered into a letter of intent with owners representing 55 percent of all outstanding shares in Beijing 8 regarding the acquisition of these owners' shares. Frill's ambition is to acquire 100 percent of all outstanding shares and convertibles in Beijing 8. The purchase price is estimated to amount to approximately SEK 47.8 million, through newly issued shares and convertibles (on similar terms as in the Acquisitions). Frill has initiated a due diligence process and the acquisition is expected to be completed during Q2 2021, provided that an agreement on acquisition is entered into.
Investment Thesis - Could Frill Holding be the next success story?
CEO Peter Blom, former CEO of Karo Bio (which I also owned in early days) is a business tycoon when it comes to adding value. Peter has an extensive track record with scaling up businesses together with mergers and acquisitions. He has held a wide range of senior roles in companies like Mobile Operator 3, Viasat, Häagen Dazs, Sony and Valio. Peter was the CEO of Karo Pharma AB and led an impressive journey with the company that was later sold to EQT.
Company forecast and financial targets:
Due to the recent acquisitions, Frill Holding AB provides forecast and financial targets for both sales and earnings measured as EBITDA for the period 2021-2025. For the current year, sales are estimated to rise to SEK 71 million and then gradually rise to approximately SEK 565 million for the full year 2025. The EBITDA result for 2021 is estimated to be SEK 0.5 million and then gradually increase to SEK 210 million in 2025.
During the previous week, Frill announced that the company had acquired 100 percent of the shares in the companies IQ Fuel AB, Kling Homie AB and Nathalie’s Direct Trade AB. Previously, Frill also acquired Bezzt AB and signed an exclusive Nordic distribution agreement with Bacoccoli.
"I am very pleased that the Frill Group has in such a short time put together a product portfolio of very strong brands, which puts us in a good position to become one of the Nordic region's leading functional foods companies," said Peter Blom, CEO of Frill, in connection with the acquisitions and continued:
“Through a sufficiently large and properly composed product portfolio, we will be an interesting and strong counterpart for buyers at all levels - at both the large chains and at more specialized retailers of functional foods. This allows us to expand quickly, and we have eliminated the risk of a smaller company, with only a few brands/products to offer.”
In more detail, the company leaves the following financial targets after the acquisitions:
Valuation based on targets simple metrics used:
Be aware. Current peers trading at x3-4 EV/Sales FY2022-2023 and at EV/EBITDA x20-30.I see potential valuation around 7,5kr - 9kr based on assumptions above. Discounted @ 15% cagr.Early days but could be really interesting. Deeper analyis and more to come...
This is not a recommendation. I do own shares in the Company. Always do your research Before investing.