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Warpaint London

Warpaint London plc Acquisition of USA Distributor

Commenting, Sam Bazini and Eoin Macleod, Joint Chief Executives of Warpaint, said:

“We see the acquisition of Leeds Marketing as a further important milestone in our growth story. Since admission to AIM, we have focused on international expansion and the USA is central to that strategy. The Acquisition will allow Warpaint and its brands direct access to some of our key existing customers, as well as opening up a number of new opportunities in the USA and the Americas more widely.

“We look forward to integrating the Leeds Marketing staff into the existing Warpaint team and continuing to expand the routes to market for our products.”

Warpaint London plc (LON:W7L), the specialist supplier of colour cosmetics and owner of the W7 and Technic brands, today announced the acquisition of the Company’s USA distributor, Marvin Leeds Marketing Services Inc.

Leeds Marketing, based in New York, currently derives approximately two thirds of its revenue through the distribution of the Company’s W7 products, with the remainder being through the sale of other branded cosmetics. Leeds Marketing was the Company’s exclusive distributor in the USA until January 2018 and sells the Company’s products to major ‘off-price’ retail groups in the USA and Canada, including the TJX Companies (trading under their US brands TJ Maxx and Marshalls, and Canadian brand Winners) and Bealls Outlet Stores. Recently Leeds Marketing has opened new accounts for W7 and other Warpaint brands with a number of retailers in the USA, including Century 21 (12 stores), Forever 21 (506 stores) and Macys Backstage (72 stores).

The USA is the world’s largest colour cosmetics market by value and the Company believes the Acquisition will allow it to have greater control over its North American sales activities, enabling it to achieve its declared strategy of international expansion, particularly in the United States. In addition, the Acquisition is expected to open up further opportunities to expand sales in Central and South America, where customers prefer to be served by a USA-based entity.

In the year to 31 December 2017 Leeds Marketing had revenue of US$5.9 million and profit before tax (adjusted for non-recurring costs after completion of the Acquisition) of approximately US$0.4 million. Net Assets, adjusted for a capital reorganisation on completion of the Acquisition, as at 31 December 2017 were US$1.1 million.

Under the terms of the Acquisition the consideration will comprise US$2.16 million in cash, subject to an adjustment depending on the net assets acquired which are expected to be US$0.8 million. The Company has paid US$2 million in cash with two further payments of US$80,000 due on 30 September 2018 and 31 December 2018, subject to the net asset adjustment.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.