The stock price of integrated health and wellness company Neptune Wellness Solutions Inc. (NEPT) has been trading higher in pre-market session today. As of 08:22 a.m. EST, the stock was trading at a gain of 43.30% to $3.74 for acquiring a controlling stake in organic baby food firm Sprout Foods.
What exactly is going on?
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Neptune Wellness is a plant-based lifestyle products company with a focus on sustainability and purpose that offers integrated, multi-faceted health and wellness products. The company offers innovative health and wellness products, changing consumer behavior by developing products that adhere to ethical and environmental values. The Company’s B2C and B2B business model focus on customer-oriented brand development provides Neptune with an international reach and scale; from its owned and operated manufacturing facilities that manufacture products to top retailers in major global markets.
Neptune will take a controlling and management interest in Sprout Foods, an organic baby food and toddler snack business which generates net revenue of $28 million annually. Morgan Stanley Expansion Capital (“MSEC”) has been managing Sprout as its portfolio company since 2018. In connection with this transaction, MSEC-managed investment funds will become major shareholders in Neptune and partner with the company to help grow Sprout as part of the Neptune consumer products portfolio.
With acquisition of an ownership interest of 50.1% by Neptune, Sprout will be operating as a Neptune’s subsidiary. The consideration for the transaction includes the US$6 million in cash payment and the issue of 6,741,573 Neptune shares with a current market value of USD$12.0 million. MSEC is guaranteed by Neptune for a USD$10M note issued by Sprout. The Neptune/Sprout combination will increase revenue for both companies, as multiple revenue synergy opportunities were identified on near-term and long-term metrics, not to mention exciting new product pipelines that will be introduced under the Sprout brand.
As Sprout currently ranks #4 among organic baby food brands on Amazon, with a strong likelihood of rising to the top three, the controlling stakes gained by Neptune are likely to pay off in the coming days.