Turning Point Brands, Inc. (TPB) to Acquire VaporBeast in $27M Deal
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Turning Point Brands, Inc. (NYSE: TPB), a leading provider of Other Tobacco Products (OTP) through brands such as Stoker’s, Zig-Zag and Primal, today announced that it has signed a definitive agreement to acquire Smoke Free Technologies Inc. d/b/a VaporBeast for total consideration of approximately $27 million. The transaction is expected to be immediately accretive, pre-synergies.
VaporBeast is one of the leading e-commerce platforms and sales organizations serving the new evolving non-traditional channels of retail distribution. The company markets a wide range of products, including e-liquids, vaporizers and accessories, with a number of products under their own proprietary brands, directly to consumers and to more than 4,700 non-traditional retailers.
The purchase price is approximately $27 million, subject to a working capital adjustment. The purchase price will be satisfied through $4 million in cash at closing, $19 million in short-term notes payable, plus $4 million in payments deferred for eighteen months. The transaction is expected to close before year end, subject to the satisfaction of customary closing conditions. For the trailing twelve months ending September 30, 2016, VaporBeast had revenue of $53.2 million, net income of $6.4 million and EBITDA of $6.9 million (see Schedule A for a reconciliation). VaporBeast’s net income reflects its tax treatment as an S corporation and therefore is not comparable to net income of entities taxed as corporations; in lieu of corporate federal income taxes paid at the VaporBeast entity level, the VaporBeast shareholders are taxed on their share of the company’s taxable income.
“We’re very excited to welcome VaporBeast into the Turning Point Brands family,” President and CEO Larry Wexler said. “VaporBeast has rapidly established itself as a trusted source for retailers and consumers who seek a deep array of products not offered in traditional retail. They sell to consumers on their website and to the new evolving non-traditional retail channels.”
We see opportunities for growth by leveraging VaporBeast’s leading e-commerce platform with TPB’s experienced sales organization by:
- Introducing certain TPB products into VaporBeast’s customer base
- Utilizing their efficient e-commerce platform to distribute products not offered in traditional retail to a portion of the TPB customer base
- Accelerating the penetration of additional non-traditional retail stores
- And lastly, strengthening their organization through the application of proven best practices to expand breadth of products sold to customers
“We have been investing in our sales distribution into the fast-growing non-traditional retail channels and VaporBeast clearly allows us to dramatically accelerate that effort with significantly less resources,” Wexler said.
“While we have experienced dynamic growth over our five years of existence, teaming with TPB will allow us to continue to grow VaporBeast amid the evolving regulatory environment,” said Tim Campbell, VaporBeast’s Founder. He continued, “TPB’s regulatory expertise and nationally recognized sales force offer unique elements of capability to ensure and promote our future success and for further penetration of the fast-growing alternative retail channels.”
VaporBeast (http://www.vaporbeast.com) employs 48 people and will continue to operate from Carlsbad, Calif., where it is based. TPB employs 245 people throughout the country including its corporate headquarters in Louisville, KY and its Moist Snuff Tobacco manufacturing operation in Dresden, TN.
The VaporBeast transaction is Turning Point Brands’ second acquisition since the company completed its initial public offering in May 2016. As previously disclosed, TPB announced it signed a definitive agreement on November 4th to purchase four chewing tobacco brands and a twist tobacco brand from Wind River Tobacco Company for approximately $2.5 million. The transaction is expected to close on November 18, 2016. These brands represent approximately two share points in the chewing tobacco category.
“Both acquisitions highlight our strategy to buy attractive brands and assets within a fragmented OTP market on an accretive basis,” Wexler said. “We intend to grow the value of these assets by applying our OTP experience, best practices and core competencies -- including our national distribution infrastructure, salesforce, brand experience, product development and regulatory infrastructure.”
TPB management has scheduled a conference call to discuss the acquisition on Friday, November 18, at 8:30 a.m. EST. Interested analysts and professional investors can register and participate through one of these call-in numbers:
1-844-889-4324 (U.S., toll-free)
Participants should dial in at least 15 minutes in advance of the call. The call also will be broadcast live as a listen-only webcast from the investor relations section of the company’s website at http://www.turningpointbrands.com/investor-relations/events-and-presentations. A replay of the audio webcast will be available on the site one hour following the call; those who wish to listen to the replay by phone can call 1-877-344-7529 using the access code 10096914.
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Create E-mail Alert Related CategoriesCorporate News, Management Comments, Mergers and Acquisitions
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