Longtable Group Ltd (ASX: LON) shares entered a trading halt with the release of its half-year results last week pending an announcement to acquire Maggie Beer Products Pty Ltd for $10 million.
The takeover details have now been released and the trading halt has been lifted. Longtable has found its share price down nearly 30%.
Finishing What They Started
Longtable initially purchased 48% of Maggie Beer Products in July 2016 for the price of $15 million, at which point a new CEO and leadership team were appointed. What followed was two years of financial struggle, with Maggie Beer products recording EBITDA in FY18 of $1.3 million in the red.
Turning performance around, Longtable has announced that Maggie Beer Products had an H1FY19 EBITDA of $1.5 million in the black.
Capital Raise
Longtable today announced a capital raise to complete the purchase of Maggie Beer Products. A placement is expected to raise $2.18 million, with a further $13.7 million from an entitlement offer for a total raise of $15.9 million.
The breakdown of funds is as follows:
- $8.5 million for cash consideration for the acquisition of Maggie Beer Products
- $6.5 million for working capital, research and development, sales and marketing initiatives
- $0.9 million for costs of the offer
On top of the $8.5 million cash consideration, the acquisition structure also includes a $1 million scrip consideration and $0.5 million convertible note. The $10 million purchase price is an implied acquisition multiple of approximately 10.6 times FY19 projected EBITDA.
Going Forward
As for the rest of the funds raised, Longtable’s plans involve an increased focus on China exports through organic certification of biodynamic milk and other dairy products, as well as an increase in marketing campaigns. There are also plans in place to launch two new sites for Saint David Dairy, the first site being in Sydney.
Prior to the trading halt, Longtable had seen their share price rise 34% in just five days. These gains have very quickly disappeared. As for the long-term prospects, only time will tell if Longtable can stabilise EBITDA and find a way to continue growing the business. In the meantime, there are many other better small-cap ASX shares to buy and hold on the ASX, such as those two below.
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Disclaimer: At the time of writing, Max do not own shares in any of the companies mentioned.
