Wellnex Life is purchasing one of Australia’s largest topical pain relief brands for $22 million and undertaking an equity raise to fund the deal.

Wellness brand and product manufacturer Wellnex Life (ASX:WNX) has entered into a binding agreement to acquire the business and assets of Pain Away for $22 million, including $1.15m of inventory at cost, payable in cash.

Established in 1999, Pain Away is the largest Australian-owned topical pain relief brand and the number two provider of topical pain relief products in Australia.

The company develops and manufactures topical pain relief products focused on joint and muscle pain using all natural ingredients.

Pain Away’s current product range consists of 25 individual products across five main categories including  creams, sprays, patches, lotions, tablets, capsules and bath salts.

The products are distributed nationally through over 6,000 pharmacy outlets across Australia, including Chemist Warehouse, Terry White Chemmart, Priceline Pharmacy, Amcal  as well as grocery retailers including Woolworths, Coles and Aldi.

Pain Away has exhibited strong and consistent financial performance with three-year revenue cumulative annual growth rate (CAGR) to FY22 of 17%, complemented by gross margins of ~50%.

Pain Away generated revenue of $12.4 million during the FY22 and is expected to generate $13.7 million for FY23.

The acquisition is highly complementary to WNX’s position in the consumer healthcare industry and adds immediate scale to the company’s portfolio of healthcare brands and products, enhancing its competitive position.

Stronger WNX profile

WNX said the company’s acquisition of Pain Away adds significant scale to the company’s 100%-owned brand portfolio, whilst materially strengthening its financial profile.

The acquisition of Pain Away is expected to drive WNX’s consolidated revenue for FY24 to $62.9m and consolidated EBITDA to $9 million.

WNX said the company is being acquired on an attractive multiple of 1.5x EV/FY23B revenue and 4.1x EV/FY23B pro forma EBITDA.

Capital raise will fund acquisition

To fund the acquisition WNX is undertaking an equity raise including:

  • an initial placement of fully paid ordinary shares to raise $2.2 million
  • a non-renounceable pro-rata 1-for-4 entitlement offer to raise up to $5.3 million
  • a second placement of 400 million shares to raise $20 million

WNX has completed the initial placement to entities associated with strategic investor and existing shareholder Homart Pharmaceuticals, which already owned 11.13% of its issued share capital following a capital raising placement in October 2022.

The funds of $2.2m raised under the initial placement have been applied towards payment of the deposit for the sale.

The second placement and entitlement offer at an issue price of 5 cents/share represents a 5.6% discount to the closing price of WNX shares on May 17.

Under the entitlement offer eligible shareholders will be entitled to subscribe to one new share for every four shares held on the relevant record date. The entitlement offer will not be underwritten.

Opportunity to accelerate growth

WNX CEO George Karafotias said Pain Away is a well-known and growing brand that has consistently achieved strong revenue growth and consistently high gross margins.

“What is really exciting about Pain Away is the opportunity to accelerate growth of the existing portfolio into grocery and international markets, whilst extending the brand into new categories in the market, such as pet health,” he said.

“The brand is also perfectly aligned to our medicinal cannabis strategy with our focus on pain relief.

“We have completed an extensive due diligence program with the assistance of RSM (financial DD) and Holding Redlich (legal DD) and are confident in the quality of the business and assets we are acquiring.”

WNX recently announced it is on track to meet its guidance for FY23 of $29 million, 55% higher than FY22.

The company has seen continued growth for Wellnex in its owned brands and IP-licensing segments.

The company generated record revenue in the first nine months of FY23 of $22.2 million (unaudited), up 79% on pcp.

This article was developed in collaboration with Wellnex Life, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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