TAMPA, Fla. - Better Choice Company (NYSE: BTTR), a pet health and wellness company, is on track to complete its acquisition of SRx Health Solutions Inc., a provider of healthcare solutions. The all-stock transaction is valued at approximately $125 million and is expected to close between late Q4 2024 and early Q1 2025. This strategic move is anticipated to position Better Choice as a leading global health and wellness brand, expanding its offerings to pets, people, and families.
The combined entity is projected to achieve significant cash flow and operational efficiencies, driving sustainable growth. Better Choice's premium pet food brand Halo reported gross sales of around $49 million in 2023, with a notable presence in e-commerce and international markets, particularly China. In the second quarter of 2024, the company reached near break-even adjusted EBITDA.
SRx Health, with its extensive network across Canada, including specialty pharmacy locations and health/infusion clinics, reported approximately CAD$180 million in revenue and positive adjusted EBITDA in 2023. The merger is expected to yield immediate annual cost savings of about USD$1.7 million, with potential for more as integration progresses.
The combined companies have generated USD$235 million in trailing twelve-month revenue, marking a 25% quarter-over-quarter increase. The 2025 forecast for the merged companies estimates over USD$270 million in revenue and over USD$10 million in EBITDA. The pro forma fully diluted shares outstanding, including shares to be issued to SRx Health, will number 22,911,334, with insiders owning about 75%.
From a valuation standpoint, Better Choice's net tangible book value per share is $4.07, and net current asset value per share is $3.94, both reportedly below the current equity price. The acquisition aims to leverage SRx Health's expertise and infrastructure to enter new markets, including veterinary medicine with the upcoming Better Pet Rx initiative, and to explore untapped markets in the United States, European Union, and Asia-Pacific regions.
The information is based on a press release statement, and shareholders will be asked to vote on the transaction in the coming months.
In other recent news, Better Choice Company has made a significant expansion into veterinary medicine with its acquisition of SRx Health. The new venture, Better Pet Rx, is set to launch in 2025, complementing the company's existing Halo brand of premium pet food products. Further details on the acquisition and subsequent plans for Better Pet Rx will be discussed in the upcoming Shareholder Update Call.
Simultaneously, Better Choice has formed a special committee to explore potential mergers and acquisitions, asset monetization opportunities, and joint ventures. This strategic move comes after a litigation settlement that ended Alphia Inc.'s right of first refusal. The committee includes Lionel Conacher, John Word III, and Michael Young, with Mr. Young serving as the Chairman.
Moreover, Better Choice has completed an additional sale of shares after the exercise of an over-allotment option by underwriters, amassing approximately $5.3 million in gross proceeds. The initial public offering involved 639,000 shares of common stock and pre-funded warrants for 1,028,000 shares. Finally, the company has transitioned from BDO USA, P.C., to Marcum LLP as its certifying accountant for the fiscal year ending December 31, 2024.
InvestingPro Insights
As Better Choice Company (NYSE: BTTR) prepares for its significant acquisition of SRx Health Solutions Inc., recent InvestingPro data provides additional context to the company's financial position and market performance.
Despite the optimistic outlook presented in the acquisition announcement, BTTR's current market capitalization stands at a modest $3.26 million, reflecting the challenges the company has faced. This is underscored by the fact that BTTR's revenue for the last twelve months as of Q2 2024 was $35.26 million, showing a 13.79% decline. This contrasts with the $49 million in gross sales reported for Halo in 2023, suggesting a potential downturn in performance leading up to the acquisition announcement.
InvestingPro Tips highlight some positive aspects of BTTR's financial health. The company holds more cash than debt on its balance sheet, and its liquid assets exceed short-term obligations. These factors could provide some financial flexibility as BTTR moves forward with the acquisition and integration of SRx Health Solutions.
However, it's important to note that BTTR is not currently profitable, with a negative operating income of $9.9 million for the last twelve months as of Q2 2024. This aligns with another InvestingPro Tip indicating that analysts do not anticipate the company will be profitable this year.
The stock's recent performance has been mixed. While BTTR has seen a significant 14.53% return over the last week, it has experienced substantial declines over longer periods, with a 67.93% drop over the past six months and an 82.26% fall over the last year. This volatility is reflected in an InvestingPro Tip noting that the stock generally trades with high price volatility.
As Better Choice Company moves towards completing its acquisition, investors may want to consider these additional insights alongside the company's strategic plans. InvestingPro offers 16 additional tips for BTTR, providing a more comprehensive analysis for those interested in delving deeper into the company's prospects.
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