Asaleo Care to buy TOM Organic

Asaleo already owns a portfolio of hygiene and cleaning products, including brands such as Libra.

Asaleo already owns a portfolio of hygiene and cleaning products, including brands such as Libra.

Asaleo Care is not allowing a takeover bid from its biggest shareholder, Swedish consumer goods giant Essity, to distract it from growing its business and has agreed to pay $12.75m for the TOM Organic business that sells a range of feminine hygiene products.

The acquisition further extends Asaleo Care’s portfolio into higher-margin categories, with anticipated first-year net revenue to exceed $11m and underlying EBIT expected to be $1.7m.

The earnings are expected to increase to $3.5m-$4m in the second year after scale and supply chain benefits have been realised.

Asaleo already owns a portfolio of hygiene and cleaning products, including brands such as Libra, but the acquisition of TOM Organic will give the company an entry into a personal care subcategory driven by demand from consumers who prefer natural and sustainable products.

Asaleo chief executive Sid Takla said TOM Organic’s sustainable product range, innovation pipeline and digital capabilities aligned strongly with its strategy.

“TOM Organic delivers profitable product diversification and significant additional financial benefits by leveraging our existing scale and supply capabilities,” Mr Takla said.

The deal comes as Essity this month launched a bid for Asaleo at $1.26 a share. Essity already has a 36.6 per cent stake in the company. The takeover looks stranded with Asaleo’s second-biggest shareholder, fund manager Allan Gray, tagging the bid as undervalued and declaring it would not sell into the offer.

Another major investor in Asaleo has also hit out at Essity, with Spheria Asset Management arguing the company was on the verge of a major rerating under its new management team and the $1.26 per share offer low ball.

Asaleo chairman Harry Boon has advised shareholders to take no action on the Essity takeover offer.

“Our board committee is carefully reviewing the Essity proposal and expects to be in a position to comment further early in the new year. Prior to then, shareholders are advised to take no action,” Mr Boon said.

Credit Suisse has recently upgraded its price target for Asaleo to $1.50 (from $1.28) and maintains an outperform rating. Citi has maintained its $1.30 price target and buy recommendation.

Shares in Asaleo closed down slightly at $1.34.