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Up 12% this week, why the BWX (ASX:BWX) share price is rising

The BWX Ltd (ASX: BWX) share price has gone up more than 10% this week. An acquisition called Flora and Fauna was key.

BWX’s acquisition

Earlier this week, BWX unveiled a new acquisition called Flora and Fauna for a total cost of between $27.9 million to $30.8 million.

Net sales for Flora and Fauna were $12 million in FY20 and forecast to be in the range of $16.4 million to $17.1 million in FY21. That means the revenue acquisition multiple is going to be between $16.4 million to $17.1 million.

Flora and Fauna is a Certified B Corporation online retailer focused on vegan, ethical and sustainable products. It has 94,000 active consumer accounts and over 300,000 unique monthly visitors. It has 300 brands available across beauty, personal care, lifestyle, baby & kids, pet, food and health.

The business will operate alongside BWX’s e-commerce business, Nourished Life, forming a new business unit within the company. The founder and CEO of Flora and Fauna, Julie Mathers, and her entire team will be joining the BWX business.

What does this mean for BWX’s financials?

BWX believes that the acquisition will add to profit/earnings per share (EPS) in FY22 and be strongly helpful for EPS by FY24 as it achieves its anticipated synergies.

The acquisition is going to be fully funded through a debt facility by the company’s lender.

It’s expected to be completed in July 2021.

Management comments

BWX CEO and Managing Director Dave Fenlon said: “With complementary categories and minimal consumer and SKU overlap, the two brands will benefit from a strategic approach to customer experience and promotions, as well as operational efficiencies. 

We know that consumers are placing increasing value on sustainable lifestyle choices, as well as direct-to-consumer convenience. With these two fast growing online platforms, BWX intends to remain at the forefront of the global wellness revolution and is focused on continuing to evaluate opportunities to further enhance and grow its direct-to-consumer offering.”

Summary thoughts on the BWX share price

BWX shares have recovered from the COVID lows and the difficulties of 2018 to 2019.

Broadening the reach of BWX is probably a good idea, though investors will be keen to see that acquisitions are smart and bedded in well. It may have acquired too many businesses too quickly a few years ago, so shareholders may not want to see rapid acquisitions again.

The BWX share price isn’t cheap, so it will have to demonstrate good profit growth to keep things rising.

It could be one to watch, but there are other ASX growth shares that appeal to me more right now.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.
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