eCargo goes on an Australian shopping spree, to acquire a Metcash business and Jessica's Suitcase
Written on the 9 November 2018 by David Simmons
China-based eCommerce group eCargo (ASX: ECG) has announced a raft of acquisitions to further its reach in Australia.
Of particular note is this morning's announcement from ECG that the company is set to acquire 85 per cent of Metcash's (ASX: MTS) China business.
The acquisition will see ECG acquire 85 per cent of Metcash Export Services, which includes its China-based subsidiary Metcash Asia Limited, a wholly owned foreign enterprise in China.
Once complete, the acquisition of Metcash will act as an excellent bridge for Australian businesses looking to get their products into China.
Metcash is Australia's leading wholesaler and distributor, and supplies and supports over 10,000 independent retailers and over 90,000 wholesale customers including IGA, Mitre 10, and Cellarbrations.
ECG intends to utilise Metcash as a way to ensure products wind up on Chinese virtual and bricks & mortar shelves.
The combined business will offer eCommerce operations, an online incubation platform for small and emerging brands, a multi0brand eCommerce hub for established brands, a B2B wholesale distributor, and endorsements from opinion leaders in the region.
Executive chairman of ECG John Lau says there are three important advantages the deal gives both parties.
"This transaction is the missing piece of the puzzle for ECG," says Lau.
"The three key blocks are 1. Good products at a good price, 2. Good logistics, and 3. Good sales and marketing into the right channels."
"While we are good at logistics, the Metcash supply agreement gives us access to quality Australian products at competitive prices."
The consideration payable for the acquisition is $2.5 million plus 85 per cent of the net asset value of the business, estimated to be between $5.5 million and $7.4 million, and deferred consideration of up to $3.5 million.
ECG also announced on Friday that it has completed the acquisition of Australia-based eCommerce company Jessica's Suitcase.
This acquisition was first announced in January 2018, but the remaining 55 per cent of the shares in Jessica's Suitcase were only just acquired today.
Jessica's Suitcase was founded by Jessica Rudd, someone seen as a key opinion leader in China, which Lau says is an important attribute for the company.
"We are very pleased to bring Jessica's Suitcase full into the ECG family ahead of expectations," says Lau.
"This cements the partnership the businesses have formed since they first merged, making way for accelerated growth of their suite of China marketed services."
Shares in ECG are up 11.11 per cent to $0.15 per share and shares in Metcash are up 0.35 per cent to $2.88 per share at 10.45am AEDT.
Business News Australia
Author: David Simmons