“The acquisition itself is a very big step forward as an infant formula producer,” she said.
Speaking from China, where Bubs’ sales have surged over the past year, Mrs Carr said Bubs had strong knowledge of Deloraine after having a manufacturing agreement with them in place from June last year.
She described Deloraine as “the ideal target for us,” and a company that had generated strong interest from others as well.
“Under the new climate of regulations (in China), if any Australian infant formula brand wants to enter China, having control and ownership over that particular point in the supply chain is absolutely crucial, even today, but it certainly mitigates our risks for further regulatory changes moving forward,” she said.
Bubs also revealed it had entered into an agreement for a private share placement with the private equity firm C2 Capital Partners, that would raise about $31.44 million.
C2 will ultimately hold 15 per cent of Bubs, because it will also buy Bubs shares in off market trades from existing shareholders, Nulac Foods.
This is the biggest milestone that we’ve passed in our journey to date.
Bubs chief executive officer Kristy Carr
C2’s managing partner Steve Lin said C2 was pleased to partner with Bubs.
“We have been very impressed with the important milestones that Bubs has achieved in Australia and China. We see great potential in China for Bubs, an authentic Australian brand that is building on a sophisticated vertically integrated supply chain and high-quality and trustworthy infant nutrition product portfolio,” he said.
While the Deloraine facility has Chinese regulatory approval to produce infant formula that can be exported to China, Bubs is still to receive regulatory approval from China’s State Administration for Market Regulation (SAMR) for its goat milk infant formula brand to be sold in bricks and mortar stores in China.
But Mrs Carr said Bubs was “very confident” that in time it would get this regulatory approval.
Shares in Bubs came out of a trading halt on Monday, and in early trading were up more than 5 per cent on the acquisition news. They eventually closed down one cent at 79.5 cents.
Darren is the mining and agribusiness reporter for The Age and The Sydney Morning Herald.