The Breville Group Ltd (ASX: BRG) share price is trading lower on Friday.
In morning trade, the appliance manufacturer’s shares are down 2% to $26.43.
This is despite Breville announcing a key acquisition this morning.
What did Breville announce?
This morning Breville announced that it has entered into an agreement to acquire 100% of the Italian-based prosumer specialty coffee group, Lelit. The transaction is expected to complete by early July 2022 following a pre-acquisition restructure of the Lelit Group.
According to the release, Lelit was founded in Castegnato, Italy in 1985. It designs, manufactures, and markets premium prosumer home coffee equipment in Europe and throughout the world.
Management believes that as a rapidly growing disruptor in the premium Italian-made espresso machine and grinder market, Lelit strategically complements Breville’s award-winning coffee portfolio. It also notes that it brings together two iconic companies in the design and distribution of preeminent home coffee equipment.
Breville Group’s CEO, Jim Clayton, commented: “The acquisition of Lelit brings together the two great coffee cultures of the world: Italy and Australia. Both companies have a shared passion for using product innovation to improve our customers’ coffee experience at home, and we look forward to working alongside LELIT and its existing partners to further accelerate its growth and product innovation, while preserving the values that underpin its Italian identity.”
What’s the cost?
The release notes that Breville will acquire 100% of Lelit from the founders and current owners on a cash and debt free basis for a total consideration of approximately 113 million euros, subject to customary settlement adjustments.
This will comprise half in cash and half by the issue of fully paid ordinary shares in Breville priced at $27.64 per share. The latter will be subject to a five-year trading lock post completion. The cash portion will be funded from existing cash reserves and debt facilities.
Strangely, no details have been provided on Lelit’s sales or profits, nor whether the deal is expected to be earnings accretive. As a result, this makes it impossible to know if this deal is good value or not.
In light of this, it isn’t a surprise to see the Breville share price trading lower on the news.
The post Breville (ASX:BRG) share price falls despite 113m euros coffee acquisition appeared first on The Motley Fool Australia.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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