Adairs acquires online-only homewares brand

Adairs has entered into a binding agreement to acquire pure-play homewares retailer Mocka for approximately $80 million.

Mocka operates across Australia and New Zealand and will continue to run as an independent business with the existing management team leading its operations and strategy.

All product design, development, sourcing, and marketing is done in house across two teams operating out of Brisbane and Christchurch.

The acquisition is to be funded through Adairs’ group term debt facilities, as well as the issuing of 3.2 million ordinary shares to Mocka, and is expected to be completed in mid-December.

The new shares issued will be escrowed to until the release of Adairs’ FY21 results, while the total amount will be paid over the next two to three years.

According to Adairs chief executive Mark Ronan, the acquisition will be highly complementary to the homewares retailer.

“We have shared DNA in that we are both design-centric with in-house product design and development which allows us to offer our customers high quality ‘design-led, value for money’ differentiated product,” Ronan said.

“Importantly, this also means we have significant control of the vertical supply chain and in-market pricing. Finally, we are each highly customer-centric organization, with a passion for great service.”

Ronan also said the acquisition gives Adairs a stronger foothold in the online space – with online sales growth for 17 percent of the business to almost 30 percent with the acquisition.

“We see many opportunities for Adairs to add value to an already successful business,” Ronan said.

“Our knowledge and experience of the home market will allow us to help management further develop the Mocka brand, especially in Australia, and support the Mocka team to continue to deliver growth.”

Adairs also offered revised guidance for the business into FY20, taking into account how the addition of Mocka will affect sales and EBIT for the year.

Sales are expected to reach $419 to $435 million over the course of FY20, while earnings before interest and tax is expected to hit between $54.5 and $58.7 million.

This compares to the retailer’s initial guidance given for FY20 of between $377.7 to $393.4 million, and an EBIT of between $45 and $48 million.