Shareholders of Veritas Investments have approved the purchase of The Better Bar Company (BBC) Group for $31.2 million.
The acquisition of the hospitality outlets is expected to make Veritas $90 million a year in revenue.
It is Veritas’ fourth acquisition in 18 months.
Mark Darrow, Veritas chairman, said in a meeting to shareholders that the acquisition of the BBC group was an excellent opportunity to acquire one of the best hospitality groups in New Zealand.
“With a limited number of larger hospitality groups in New Zealand, the board views the acquisition of BBC as a significant and transformational next step in its investment strategy in the food and beverage sector,” he said.
“The BBC opportunity is a game changer for Veritas and the board believes it will add significant scale and diversification to Veritas’ current business. We expect the acquisition to increase investor interest in Veritas and the board will also benefit from the addition of an experienced director in Richard Sigley.”
Darrow said that there were supportive vendors prepared to take significant shareholdings in Veritas.
There were also further opportunities to expand BBC group’s operations in NZ, in the hospitality industry that, to March this year, had its strongest growth in six years, he said.
In purchasing the BBC group, Veritas Investments subsidiary Veritas Holdings will pay $23.4 million in cash and issue 6,964,286 new Veritas shares to the certain BBC vendors.
Immediately following completion BBC vendors and their associates will hold 15.72 per cent of Veritas’ total shares.
Veritas will also assume approximately $6 million of the BBC group’s net debt, with $3 million in cash held back as a retention amount to deal with any purchase price adjustments and warranties.
Darrow said that the group’s goal is to enhance revenue and margin improvement through its scale and broad capability.
“In the food, beverage and franchise sectors our intention is to expand the existing BBC business utilising Veritas’ scale and infrastructure and leverage group buying power and management expertise across all businesses.”
The Veritas board also confirmed at the meeting its intention to maintain its policy of paying between 60 and 70 per cent of net profit after tax in dividends.
The appointment of BBC chairman Richard Sigley to the board of Veritas was approved at the meeting, subject to the completion of the BBC acquisition.
Sigley is the current CEO of the Nourish Group, and brings wide hospitality industry experience to the Veritas board, Darrow said.
John Moore will join the Veritas board on December 1, 2014, replacing Stefan Preston who did not seek re-relection.
Directors are predicting a revenue of between $71 million and $78 million for the year ending June 30, 2015, including the BBC acquisition for seven months of that financial year.
Revenue for the year ending June 30, 2014 was $29.972 million, with a net profit after tax of $4.353 million.
