Kogan (ASX:KGN) share price storms higher on $122m Mighty Ape acquisition

The Kogan.com Ltd (ASX: KGN) share price is storming higher on Thursday after announcing a new acquisition.

At the time of writing, the ecommerce company’s shares are up 5% to $16.93.

What did Kogan announce?

This morning Kogan announced that it has acquired 100% of the issued capital of leading New Zealand-based online retailer Mighty Ape for A$122.4 million.

This is payable over four tranches and subject to earn outs through to the delivery of its FY 2023 financial results.

According to the release, Mighty Ape operates online stores in New Zealand and Australia and has a focus on gaming, toys, and other entertainment categories. It has more than 690,000 unique customers and more than 895,000 subscribers.

It also has a reputation for fast delivery and excellent customer service. Management notes that this is demonstrated by Mighty Ape achieving Kantar’s highest rank among retailers in New Zealand for customer experience.

Financials.

Based on unaudited management accounts, for the 12 months ended 30 September, Mighty Ape generated revenue of A$120.1 million, gross profit of A$37.8 million, and EBITDA of A$9.9 million.

For the full year FY 2021, which ends 31 March 2021, Mighty Ape is forecast to generate revenue of A$137.7 million, gross profit of A$45.7 million, and EBITDA of A$14.3 million. This represents year on year growth of 43.7%, 58.1% and, 254.1%, respectively.

It is also worth noting that this excludes any potential benefits from synergies that may be available as a result of this acquisition.

Why is Kogan acquiring Mighty Ape?

Management believes Mighty Ape represents a highly complementary acquisition.

It notes that it combines two market leaders, enables Mighty Ape to build on its strong customer offering, and provides the infrastructure and expertise for Mighty Ape to further scale. Significant synergies are also likely to be available across numerous areas of the business.

Kogan.com’s COO and CFO, David Shafer, commented: “We are pleased to be bringing the iconic Mighty Ape into the Kogan Group, and are delighted to be welcoming Simon Barton and his team. We are a natural home for Mighty Ape, given similar histories and shared values — most importantly our obsession with delighting customers, and continually improving the online shopping experience. Mighty Ape has more than a decade of experience and track record of delighting Kiwi customers, and has become one of New Zealand’s most trusted brands.”

“Mighty Ape will give us significant scale in New Zealand and further strength across a variety of operational dimensions. We will be drawing on Mighty Ape’s deep experience in gaming, toys, other entertainment product categories and the New Zealand market, and combining this experience with Kogan.com’s sourcing, technology, systems, infrastructure, and marketplace capabilities, to further enhance the group’s already market-leading offering across the Tasman,” he added.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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