Apparel retailer Universal Store Holdings [ASX:UNI] is set to acquire retailer Cheap THRILLS Cycles (CTC) for an enterprise value of $50 million.
Universal describes CTC as an ‘attractive business with a strong track record of growth and exciting prospects for future expansion’.
The $50 million enterprise value represents 6.8 times FY22 underlying EBIT.
CTC posted FY22 sales of $34.6 million and an underlying EBIT of $7.3 million.
CTC was founded in 2011 in Byron Bay, focusing on youth fashion apparel. Universal said CTC’s wholesale channel represented 79% of FY22 sales.
UNI shares were up 3% on the news, bucking the trend in the overall market.
Year to date, UNI shares are down 30%.
Source: Market Index
Universal’s binding agreement with THRILLS
The youth fashion store announced a binding agreement to acquire 100% of the casual youth clothing designer CTC for $50 million.
The $50 million consideration is a mix of cash, shares, and deferred variable consideration.
Consideration will comprise $17.5 million in cash, $17.5 million in UNI shares, and a notional amount of $15 million as deferred variable consideration.
The deferred variable consideration is subject to the future financial performance of CTC.
The equity consideration of the deal will be funded by UNI issuing 3.5 million new UNI shares at an implied price of $4.96 per share.
Interestingly, 50% of the consideration shares will be escrowed until UNI releases its FY24 results.
The other half will be escrowed until UNI’s FY25 results.
Universal Store’s CEO Alice Barbery commented on the acquisition outlined today:
‘I am delighted to cement our partnership with the three founders of THRILLS. In THRILLS, Brooke, Tabitha and Ryan have built an iconic youth fashion brand and have a proven capability to deliver products our customers love. THRILLS is currently the highest selling 3rd party brand in our Universal Store business and has been a consistent and growing part of our product offer for over 8 years. We are excited by the opportunities a closer partnership can deliver in both product and brand development as well as further expansion of THRILLS direct-to-consumer channel.’
Source: UNI
UNI prices its own growth
Universal noted that CTC has a pipeline of ‘various emerging brands at different stages of development’, adding more scope for its youth fashion apparel and appealing to a wider clientele.
UNI noted that CTC’s acquisition would have delivered proforma FY22 EPS accretion for UNI of ‘circa 18% if the transaction had completed on 1 July 2021’.
Universal expects the transaction to complete in Q4 2022.
Incoming central bank digital currencies…and what it means for YOU
Central bank digital currencies (CBDCs) are soon to become an everyday reality.
The digital yuan is already live; it featured prominently at the Beijing Winter Olympics.
But China isn’t the only country experimenting with CBDCs.
Our own Reserve Bank of Australia admits it’s ‘actively researching central bank digital currency as a complement to existing forms of money’.
We must come to terms with the possible implications of its potential adoption and fast.
To learn more about CBDCs and the importance of preparing yourself for what’s to come, this presentation will cover all you need to know.
Regards,
Kiryll Prakapenka,
For Money Morning
