McPherson’s Limited (ASX:MCP) has entered into a series of formal agreements with relevant members of Chemist Warehouse Group (CWG).
The agreements establish a unique strategic relationship with CWG, structured to deliver material commercial and operational benefits to McPherson’s.
Under these agreements McPherson’s will be appointed as Chemist Warehouse’s exclusive long-term distributor of a select portfolio of Chemist Warehouse-owned or controlled health and beauty brands outside of the Chemist Warehouse Network in Australia and New Zealand.
The range, which includes Wagner Vitamins, Wagner Body Science, Bondi Protein, Foster Grant, INC and Microgenics, and will be made available to all customers within the McPherson’s distribution network.
Chemist Warehouse will, by way of initial engagement and training, and by making relevant knowhow, IP and other deliverables available to MCP, support the effective sale and distribution of the CWG brands under the Exclusive Distribution Agreement.
The exclusive distribution rights will be for an initial term of five-years commencing on 1 July 2022. McPherson’s will have three five-year options to extend the arrangements, subject to certain minimum performance thresholds on a brand-bybrand basis which McPherson’s considers it is well placed to meet.
Chemist Warehouse will increase the portfolio of McPherson’s brands which CWG currently ranges in Australia and New Zealand, to include Moosehead, Maseur, Fusion Health, Stratton, Sugar Baby and Happy Flora. Chemist Warehouse will also recognise McPherson’s as a preferred supplier of CWG, allowing MCP to enjoy the benefits of that status. The Preferred Brand Agreement will have an initial term of five-years commencing 1 July 2022. Chemist Warehouse will have three five-year options to extend the arrangements.
As part of the Strategic Alliance Chemist Warehouse will be issued approximately 14.1 million McPherson’s shares on 1 July 2022, thereby becoming a substantial shareholder, with a holding of 9.9% of McPherson’s shares on a fully diluted basis. The shares will be issued at a value of $0.88 each, based on the 5-day VWAP of MCP’s securities on the ASX up to 22 March 2022.
The initial establishment of the Strategic Alliance will have no material cashflow implications for McPherson’s. Please see the Annexure for further details regarding the initial arrangements in this regard. All McPherson’s shares issued to Chemist Warehouse will be escrowed for a period of two years and will be subject to market standard stand-still arrangements.
McPherson’s expects the Strategic Alliance to be EPS accretive in FY2023 (being the first financial year of the arrangement) based on the growth targets agreed between McPherson’s and Chemist Warehouse.
McPherson’s is delighted to welcome Chemist Warehouse onto our share register as a significant shareholder, and to be entering into the Strategic Alliance with our largest customer that is strongly aligned to our growth aspirations in the health, wellness and beauty categories,” McPherson’s Chairman Ari Mervis said:
“The strong support to be provided by Chemist Warehouse for our Core Brands as well as the incremental ranging in-store and online for our other health and beauty brands is expected to accelerate our growth domestically as well as internationally through Chemist Warehouse’s physical and e-commerce platforms.
“Further, the ability to sell the Chemist Warehouse owned or controlled health and beauty brands through McPherson’s distribution channels is highly complementary and synergistic to our existing capabilities.”
