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Swedencare
Swedencare - Diversifying and increasing US footprint (ABG Sundal Collier)
2020-06-24 21:48
Acquisition of Stratford, pro forma sales +56%
Acquisition multiples at EV/S 2.2x, EV/EBITDA 10.6x
De-risking patent situation, appr. EPS effect ~25% ‘21e
Broadening product portfolio through acquisitionOn Wednesday the 24 June, Swedencare announced the acquisition of Stratford Pharmaceuticals, a developer of premium animal supplements. The access date is said to be 1 July. Stratford is US focused, with a distribution network of more than 10,000 veterinary hospitals. The product portfolio is broad, with products relating to dermatology, joint support, hepatic and intestine health. The distribution network of the two companies enable synergies through cross-selling. Based on ’19 pro forma numbers, sales from North America grows from 29% to 54%. Furthermore, the pro forma sales per product show a 54% share of Plaqueoff products, in comparison to 84% in 2019. Even though we argue that the patent situation is not as big of a risk as one might think, this still de-risks the patent question heavily.
’19 Pro forma sales effect +56%, EPS accretion ~23%
The acquisition is accretive on Swedencare’s EPS. Using ’19 figures, the pro forma sales increase from reported numbers is 56%, and the EPS increase is 23%. If we assume a Stratford 25% sales CAGR ’19-’21 (Stratford grew 42% Q1’20), no synergies and no margin expansion in Stratford, we arrive at an EPS accretion of 25% on our pre-acquisition forecasts. See the next page for pro forma figures. The announced Stratford figures do not show the numbers below EBITDA. We have therefore assumed a similar cost structure as Swedencare for the unknown figures in relation to sales.
Lagerberg back in, Graflind retakes CFO position
At the time of the acquisition, the company announced that Håkan Lagerberg, who was the CEO of the company until recently, is now back at the CEO role. Jenny Graflind steps back to the CFO role. The strategic rationale behind the change is Håkan’s experience from US operations. The change will, in our vie
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