MADARA Cosmetics Finalizes Refocus of Core ActivitiesInside information, 2024-07-01 08:00 CEST --
AS MADARA Cosmetics has signed a binding agreement for the sale of 100% of the shares in SIA Cosmetics Nord. Over the past few years, the entity developed the SELFNAMED.com print-on-demand platform ("Selfnamed"). This completes the refocus of the Company's core activities and follows the recent announcement concerning the carve-out of the MOSSA brand (https://view.news.eu.nasdaq.com/view?id=b5f0b2bbbca2d71dd6e7eb6cb2a34a4a0&lang=en&src=listed). Similar arrangements will apply as per the MOSSA transaction, with the Company continuing to provide production and product development for Selfnamed.
The rationale for the transaction includes the consideration that a key element for the future success of the SELFNAMED.com platform is additional investment in team expansion, product development (the product is the online platform), and launches in other markets. For the Company to deliver an attractive return to its investors (using its capital allocation principles), this would imply either underinvestment in Selfnamed, which would slow down growth, or a reallocation of both monetary and non-monetary resources, which would slow down the development of the MÁDARA brand. Moreover, with the current governance model, it is not possible to attract external capital, e.g., from venture capital investment sources.
The transaction is structured as a management buyout and is deemed to have been undertaken with a related party. The acquiring entity of SIA Cosmetics Nord shares will be SIA SLFNMD, whereby the existing management team, Anete Vabule and Kristaps Birmanis, will own 30% of the acquiring entity, while the balance of SIA SLFNMD will be held by SIA KALVI Capital (reg. no 40203459954). In the latter entity, 50% of shares are held by Uldis Iltners and 50% by Lotte Tisenkopfa-Iltnere (whose holdings in the Company are 23.88% and 23.72%, respectively). All transaction-related decisions have been made following the best governance principles and the articles of association of AS MADARA Cosmetics.
KPMG was engaged by the Company for the purposes of evaluating the situation. In addition to a negative equity condition due to historical losses (at the EBITDA level as well as profit before tax), there is an outstanding debt towards AS MADARA Cosmetics approaching EUR 1m. The transaction includes the repayment of the outstanding debt and has a total consideration of EUR 1.19m. Additional information on Selfnamed can be found in the 2023 unaudited and audited financial reports of the Company.
Gunta Šulte, CEO of AS MADARA Cosmetics, states: "I consider this transaction to be very beneficial for both parties. MADARA Cosmetics will be able to continue successfully developing the MÁDARA brand in export markets with an even greater focus, while at the same time continuing to generate revenue from product development and production provision for Selfnamed. This is how we continue to grow the capacity of our laboratory and product development team, being able to provide the development of a very wide range of products. From Selfnamed's point of view, the team will be able to independently and more aggressively build its competence in the development of the print-on-demand platform, which is the core product of Selfnamed."
Kristaps Birmanis, Head Of Marketing and Business Development at Selfnamed, states: "Our main goal is to grow Selfnamed at the speed it can be efficiently grown. As our long-term strategy, we see market penetration in the US as a goal. This process has a flexibility mismatch and exceeds the various resources we can justify from the existing shareholding structure (money, people, know-how) in the long term. We believe that by separating out this activity from the Group, we can unlock the potential of further investments and, with that, grow the operations in the strategic direction that will benefit all parties."
Management retains its previous guidance, which is to achieve turnover growth of at least 10% in 2024 (i.e., EUR 22.25 million) compared to the previous year.
Management Board of AS “MADARA Cosmetics”
The shares of AS Madara Cosmetics are admitted to trading on Nasdaq Baltic First North Market.
The Certified Adviser for AS Madara Cosmetics is ZAB Eversheds Sutherland Bitāns SIA.
AS MADARA Cosmetics was founded in 2006 and has become one of the leading cosmetics manufacturers in Northern Europe and a leader in Latvia. The company' s brand MÁDARA is a pioneer in the natural skincare and make-up segment in Latvia. Since November 2017, the company's shares have been listed on the Nasdaq Baltic alternative market First North. For more information, visit investors.madaracosmetics.com.
Contact information:
Address: 131 Zeltiņu Street, Mārupe district, Mārupe, LV 2167, Latvia
Contact person: Gunta Šulte, member of the Management Board
E-mail: ir@madaracosmetics.com
Phone: +371 67 470 243
Certified adviser:
ZAB Eversheds Sutherland Bitāns SIA
Contact person: Justīne Ignatavičute
E-mail: justine.ignatavicute@eversheds-sutherland.lv
Phone: +371 28 665 066
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