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Charlie's Group founders Stefan Lepionka and Marc Ellis - Source: ONE News -
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It would be rude not to raise a glass - orange juice would seem
appropriate - to toast the founders of Charlie's.
The $129.3 million offer by Japanese beverage giant Asahi is a
massive deal and testament to many years of hard work.
The founders and major shareholders will certainly walk away with
handsome reward for that hard work - CEO and co-founder Stefan
Lepionka nets about $17 million, director and co-founder Marc Ellis
about $18 million.
As an aside - if they had not sold 15 million shares in November -
they'd be even better off.
Smaller shareholders, while they have not had a dividend along the
way, will get a 340% return on their investment if they are among
those that bought in at the beginning and held their nerve.
Greg Easton from Craigs Investment Partners says that the fact the
founders have already given the deal the nod indicates they know it
is a good one.
"It's an amazingly good price. I don't think Charlie's cumulative
profit over seven years is even positive," he said.
Charlie's has not always been a market darling.
Its listing in 2005, conducted by using a shell company and known
as a 'backdoor listing', drew some criticism from market
watchers.
Just a few weeks ago I went to a briefing on Charlie's, held by
Macquarie Private Wealth, where they detailed just how hard it was
for a small company to attract attention from the kind of investors
and brokers it needed to really tackle global growth.
It ran into a spot of trouble a few years later too, breaching its
banking covenants, but it managed to right the ship - with the help
of major shareholder Collins Asset Management.
Hitting its stride
In the past year Charlie's appeared to have really hit its stride,
especially in the massive Australian market and got its products
into Coles' 750 stores.
We've got a wee mini shopping trolley still sitting on the business
desk that Charlie's sent out to publicise the Coles agreement, such
was the hype surrounding the signing of that deal.
From August this year it will also be in Woolworths' 850 stores
across Australia.
The Australian market is already their largest.
They are expecting to hit gross sales of almost $50 million this
financial year and had already set their sights on $100 million of
sales within the next two years.
Which is why it has to be said that the celebrations from a market
perspective, from a - dare I use the term - 'NZ Inc' perspective,
is tinged with a touch of regret.
They exceeded their goal of building a $100 million dollar company
and for that are to be congratulated.
But it is reminiscent of when 42 Below was sold back in 2006 for
about the same amount.
There's the old cliché that New Zealanders build their
businesses and their wealth until they can afford the house, the
boat, the bach.
The founders' windfall from this deal exceeds those kinds of
aspirations so I don't think you can accuse them of that.
I'd also like to think that even with a nice fat cheque in their
back pockets that we haven't seen the last of these
entrepreneurs.
But even so, this morning Graeme Thomas from Milford Asset
Management said: "Why not build it into a two, three four, five
hundred million dollar company.
There's talk in New Zealand all the time about us talking smaller
companies here with great ideas to the world markets and there's
certainly capital available in this market, I mean New Zealand
investors are looking for good investment opportunities and this is
one we could have exploited over time".
Be that as it may, it pales in comparison to the kind of global
grunt a giant like Asahi can provide.
It's reportedly going to fork out billions acquiring businesses
over the coming year, last year it had annual revenue just shy of
$2 billion dollars.
It plans to retain Charlie's as a standalone company and keep
Stefan Lepionka on as chief executive, but it will also give
Charlie's access to capital and distribution on a scale it simply
does not possess on its own.
The deal has a few hurdles to clear yet - the Overseas Investment
Office must approve it and 90% shareholders must accept the deal -
but it's hard to see why it should stumble at either of them so
it's highly likely the NZX will soon be bidding the cheeky
Charlie's Group sayonara.
Commenting on the deal Lepionka said "Kiwis are bloody good at
pioneering ideas and that's what they (Asahi) are buying".
It's just a bit of a shame we can't keep hold of those pioneering
ideas for a bit longer and take them truly global big business,
ourselves.
