Toronto-based Emerge Commerce has signed a definitive agreement to acquire two North American brands that offer subscription products: Toronto’s Carnivore Club and Georgia-based BattlBox, which owns Carnivore Club.
Emerge has agreed to pay up to $23.8 million CAD ($18.95 million USD) for BattlBox, consisting of $12.9 million CAD in cash, $1.9 million CAD in deferred consideration, and contingent earnout consideration of up to $9.9 million CAD. The acquisition, which remains subject to customary closing conditions and TSX Venture Exchange (TSXV) approval, is expected to close within the next 45 days.
UPDATE 07/10/2021: Emerge has since closed the deal, purchasing BattlBox and Carnivore Club for the agreed-upon price of $18.95 million USD, $10.25 million of which was upfront cash. Emerge expects the deal will result in an almost doubling of its revenue and a “considerable increase” in its adjusted EBITDA.
Emerge expects the deal to be its “largest and most profitable acquisition to date,” boosting both its subscription revenue and US presence.
BattlBox and Carnivore Club are set to become Emerge’s sixth and seventh North American brands. The company expects the deal to be its “largest and most profitable acquisition to date,” boosting both its subscription revenue and United States presence.
Emerge, which was founded in 2016, trades on the TSXV under the symbol ‘ECOM.’ The company acquires and operates niche direct-to-consumer (D2C) e-commerce brands across North America “with a track record of growth and profitability.”
“As a profitable, growing market leader in their space, BattlBox Group met all our criteria,” Ghassan Halazon, Emerge’s CEO, told BetaKit. “BattlBox has a very capable operating team and facilities in the US that we can leverage for future acquisitions and scaling logistics.”
Founded in 2015, BattlBox offers outdoor and survival gear in a subscription box format. The company’s leadership in the outdoor space led to their Netflix Original series ‘Southern Survival,’ which premiered in 2020, and featured the testing of BattlBox products. According to Emerge, BattlBox and Carnivore Club collectively generated approximately $23 million USD in revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $3.3 million for the trailing twelve months ended May 31.
“The BattlBox team has achieved no small feat by bootstrapping their way from $0 to US$23 million in revenue and US$3.3M EBITDA with no outside capital,” added Halazon. “Having your own Netflix Original Series doesn’t hurt either. BattlBox is precisely the profile of profitable D2C ecommerce ‘rebels’ that EMERGE is building a portfolio around.”
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Carnivore Club is an established brand that BattlBox acquired in 2019, that delivers premium cured meats directly to your door. Based in Toronto, Carnivore Club secured a deal through Dragon’s Den shortly after their launch in 2013.
Halazon said, given BattlBox’s acquisition of Carnivore Club, that Emerge views the BattlBox team “as an operating unit capable of future [mergers and acquisitions] as well as running current operations.”
The total purchase price for the acquisition could reach up to $23.8 million CAD, plus customary working capital and tax adjustments. The earn-out may be paid in cash, common shares of Emerge, or a combination of the two. Emerge plans to finance the deal using its existing cash on hand.
The deal is set to become Emerge’s sixth acquisition in North America, and its second since becoming publicly listed on the TSXV in December 2020. Emerge’s current portfolio of D2C brands includes UnderPar, JustGolfStuff, WagJag, and truLOCAL, which also offers meat delivery.
“We see some good synergy potential, including cross-selling opportunities and shared facilities, between Carnivore Club and truLOCAL, given both are focused on the meat segment,” said Halazon.
As part of the transaction, BattlBox’s team will stay on, while founder and CEO Daniel Dabbs will step down, while CMO John Roman will become CEO of BattlBox once it joins Emerge.
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Halazon said Emerge expects to continue to be acquisitive, and is “investing heavily to accelerate the pace of M&A over the next year,” adding that the company currently has “an extensive acquisition pipeline, and multiple signed [letters of intent].” Some of the categories Emerge is exploring right now include groceries and food tech, health and wellness, golf, pets, and home and decor.
Emerge announced the BattlBox acquisition alongside the company’s Q2 financial results, released this morning. During the second quarter of 2021, Emerge generated quarterly revenue of $6.8 million CAD, an increase of 182 percent compared to Q2 2020. The company said this revenue growth was driven by its acquisition of truLOCAL in January.
Emerge also saw positive adjusted EBITDA of $80,000 in Q2, a decrease relative to the second quarter of 2020, when it earned $400,000. Overall, Emerge generated a net loss of approximately $2.2 million, a decrease compared to Q2 2020, when it saw a profit of nearly $500,000. As of June 30, Emerge had $18.9 million in cash on hand, following the completion of its $12.1 million private placement in March.
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Fellow TSXV-listed firm WeCommerce, which also focuses on acquiring and operating other companies, also recently released its quarterly financial results. The Victoria-based company went public in December via reverse takeover, and focuses on buying SaaS, digital goods and services businesses that build apps, themes, and run agencies that support Shopify merchants.
In the second quarter of 2021, WeCommerce saw its revenue grow to $9.5 million CAD, an increase of 85 percent compared to the same period last year, fuelled by its recent acquisitions. The company generated a net loss of nearly $45,000, a drop relative to Q2 2020, when it recorded a net income of about $508,000. WeCommerce attributed part of the loss to acquisition-related depreciation and amortization costs.
At the end of June, Shopify revealed some substantial changes to its partner ecosystem, including lower commission payments, which WeCommerce hailed as a positive development for its portfolio companies. Chris Sparling, WeCommerce CEO, said the company is “already seeing the benefit of these changes across our businesses and the broader ecosystem.” Following the close of Q2, WeCommerce closed a $33.7 million bought deal financing.
Feature image courtesy of Emerge Commerce