By Nina Hendy
BWX chief executive John Humble admits he didn't get much sleep on Monday night after unveiling an ambitious bid to buy back the Melbourne company he co-founded.
The emergence of Mr Humble's $6.60 per share bid, which is being made in concert with BWX finance director Aaron Finlay and private equity partner Bain Capital, sent BWX's share price soaring 35 per cent on Tuesday to $5.95 by the market close after rising as high as $6.16 earlier in the day.
The spark for the management-led buyoung started with a difference of opinion over future growth plans between the cosmetics company's executive and its investors.
BWX chief executive John Humble (right) and finance director Aaron Finlay have launched a bid for the company.Credit: Michael Dodge
The consortium wants to acquire 100 per cent of BWX and plough ahead with strategic growth plans into new global markets, while shareholders no longer support future mergers and acquisitions.
“We obviously think the company has been performing well. The key behind this proposal is the opportunity we see being in private ownership that are not available in public ownership,” Mr Humble told The Age and Sydney Morning Herald.
“The appetite for further M&A is not at the same level in the public setting.”
BWX is the owner of Australian skincare brand Sukin, which grew its Australian distribution footprint significantly when launching into Coles in September 2017. Sukin is the country’s number one pharmacy brand, turning over $62 million in the 2017 financial year.
The consortium proposes a privatisation of the company, that would enable shareholders who agree with the future strategy to remain through a scrip offer.
The consortium values the skin and hair care manufacturer and distributor at $860 million, including equity of $810 million and about $50 in debt.
Ms Humble confirmed BWX management only met Bain Capital in April, but the shared appetite for mergers and acquisitions was instantly apparent.
“The fact that we disclosed this so early in the process has come as a surprise to people,” Mr Humble said.
John Humble (left) and finance director Aaron Finlay .Credit: Michael Dodge
“Some think the whole process has run quite quickly. The point we’d make there is that quite often these things would stay under wraps for another month or two and get very far progressed out of the public eye.
“But we’re very cogniscent of the fact that we have senior executive roles within the company, and thought it was very important to have the disclosure as early as possible,” Mr Humble said.
Buyout terms include satisfactory completion of due diligence by Bain Capital and unanimous recommendation by an Independent Board Committee comprising Denis Shelley (chairman), Ian Campbell and David Fenlon to consider and respond to the indicative proposal.
The Independent Board Committee was being formed this week and Bain Capital has not yet commenced due diligence. Humble expects the process to take about four weeks if access to company information is granted by the Independent Board Committee.
Bain Capital recently oversaw the build-out of the China business for cosmetics business Carver Korea and also supported significant expansion into the US for Sundial Brands. Both brands were sold to Unilever last year.
BWX made a strategic shift away from third-party manufacturing to focus on brand building in the 2016 financial year. It established a direct relationship with UK retailers Boots and Holland & Barrett around the same time and acquired Mineral Fusion a year later, providing entrance into the US market.
The buying spree continued in June last year when BWX acquired US brand Mineral Fusion. A month later, it added ecommerce platform Nourished Life to its portfolio, then US Andalou Naturals in October last year.
BWX has spent the past year implementing growth strategies into the US, China, Canada and New Zealand markets and is working to develop new markets such as India, where Sukin-branded products have been recently registered.
Recent acquisitions and continued organic sales growth provided BWX with near 80 per cent growth in sales of the first half of 2018, increasing underlying profits by 36.7 per cent, first-half financial results reported in February reveal.
Revenues of $67 million were announced for the first half year 2018, representing a 79 per cent increase on half-year 2017.
But investors were unimpressed with a profit downgrade and sold the stock down. The global natural beauty & personal care sector is projected to be a $50 billion industry by 2019, according to a BWX presentation released this month.