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In an exciting move within the manufacturing and retail industry, a fast-growing group based in Manchester, Supreme, has recently announced its acquisition of Liberty Flights Holdings Limited, a prominent vaping manufacturer. The deal, valued at nearly £15m, marks a significant milestone for both companies. This article will delve into the details of the acquisition, exploring the background of the companies involved, the terms of the deal, and the potential implications for the market.

Background

Supreme, a company listed on AIM, is a leading manufacturing and retail group headquartered in Manchester. The company specializes in manufacturing and importing a wide range of products, including vaping devices, batteries, lighting, wellness products, and sports nutrition items. Supreme’s products are sold through well-known retail chains such as B&M, Poundland, Home Bargains, and The Range. With its diverse product portfolio and extensive market reach, Supreme has established a strong presence in the UK.

Liberty Flights: A Specialist in Premium E-Liquid and Vaping Devices

Founded in 2010 and based in Darwen, Liberty Flights is renowned for its expertise in producing premium e-liquid and high-quality vaping devices. Additionally, the company distributes a comprehensive catalog of third-party e-liquid brands on a global scale. Liberty Flights has demonstrated impressive financial performance, generating approximately £9m in revenue and achieving an EBITDA of £1.5m for the year ending January 31, 2021.

The Acquisition

Standalone Operation and Integration

Following the acquisition, Liberty Flights is expected to continue operating as a standalone entity for an initial 12-month period. This approach allows for a smooth transition, ensuring minimal disruption to Liberty Flights’ existing operations and customer relationships. Subsequently, the company will be fully integrated into Supreme, leveraging the synergies between the two organizations.

Deal Terms and Consideration

Supreme Imports Limited, a subsidiary of Supreme, will acquire 100% of the share capital of Liberty Flights in a cash-free and debt-free transaction. The acquisition will be funded through Supreme’s newly-established rolling credit facility with HSBC. The total consideration for the deal amounts to up to £14.75m, payable to Liberty Flights’ three shareholders: Matthew Moden, Christopher Parker, and Abraham Spain.

The consideration includes an initial cash payment of £7.75m upon completion of the acquisition. Additionally, a deferred payment of £2m will be made after 12 months. Furthermore, an earn-out payment of up to £5m will be based on Liberty Flights’ performance over a one-year period, subject to meeting specific performance metrics. Supreme estimates that, based on current performance expectations, the earn-out payment will amount to approximately £2m.

Strategic Alignment and Growth Opportunities

Complementary Offerings and Market Reach

Sandy Chadha, the chief executive of Supreme, expressed enthusiasm about the acquisition, highlighting the longstanding relationship between the two companies. Chadha emphasized the strong alignment between Liberty Flights’ vaping products and Supreme’s existing offerings. The acquisition presents a valuable opportunity to leverage the respective strengths of both brands, including their manufacturing capabilities, product portfolios, and customer profiles.

Market Expansion in the Pod System Segment

Supreme’s acquisition of Liberty Flights also bolsters its market presence and accelerates its entry into the fast-growing pod system market. With the increasing popularity of pod-based vaping devices, this segment represents a significant growth opportunity for Supreme. By combining their expertise, resources, and market reach, the merged entity is poised to capture a larger share of this expanding market.

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Conclusion

The acquisition of Liberty Flights by Supreme, a fast-growing manufacturing and retail group, marks a significant milestone for both companies. The deal, valued at nearly £15m, showcases the strategic vision of Supreme and its commitment to expanding its product portfolio and market presence. Liberty Flights’ specialization in premium e-liquid and high-quality vaping devices, coupled with its global distribution network, aligns seamlessly with Supreme’s existing offerings. This acquisition positions Supreme to capitalize on the thriving pod system market and deliver enhanced value to its customers.

FAQs

1. Will Liberty Flights continue to operate independently after the acquisition?
Yes, Liberty Flights will initially operate as a standalone entity for a 12-month period before being fully integrated into Supreme.

2. How will the acquisition be financed?
The acquisition will be funded through Supreme’s newly-established rolling credit facility with HSBC.

3. What is the expected financial impact of the acquisition?
Supreme expects to pay up to £14.75m for the acquisition, including an initial cash payment of £7.75m. Additionally, an earn-out payment of up to £5m will be based on Liberty Flights’ performance over a one-year period.

4. What growth opportunities does the acquisition provide?
The acquisition enables Supreme to expand its market presence in the fast-growing pod system market, leveraging Liberty Flights’ expertise in vaping products.

5. How does this acquisition benefit Supreme’s shareholders?
The acquisition enhances Supreme’s product portfolio, market reach, and growth potential, ultimately creating value for its shareholders.

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