The Bubs Australia Ltd (ASX: BUB) share price has been amongst the best performers on the market on Thursday morning.
At the time of writing the goat milk infant formula company's shares have zoomed 10% higher to 87 cents.
Why is the Bubs share price charging higher?
This morning Bubs announced that it has signed a binding heads of agreement with the Chemist Warehouse Retail Group to form a four-year strategic alliance relating to the sale and promotion of its products in Chemist Warehouse stores.
The agreement is due to commence on June 1 and will see Bubs products sold across Chemist Warehouse retail stores throughout Australia, including its domestic and Tmall online stores.
The release explains that the latter Tmall store is the largest in the world by gross merchandise volume. In 2018 during 'Singles day' the Chemist Warehouse Tmall Global store sold over RMB 180 million worth of products in just 24 hours.
In addition to this, the company advised that the agreement provides for an initial issue of 12,356,627 fully paid ordinary shares in Bubs to be purchased by Chemist Warehouse, out of the marketing and promotional fees, in two tranches. Bubs will seek shareholder approval for the second tranche at its 2019 annual general meeting.
The company's founder and CEO, Kristy Carr, believes this is a great opportunity for the company.
She said: "I have a deep respect for the Chemist Warehouse business and this is a remarkable and unique opportunity for Bubs to deepen our relationship with Australia's leading health and beauty retailer."
Before adding: "We firmly believe this transaction will deliver strong growth in Bubs' business, as well as offer significant long-term shareholder value. This latest powerful alignment with Chemist Warehouse means Bubs' foundation strategy is complete. Now, with our key partners in place and a fully vertically integrated business with milk pool security and ownership of our manufacturing facility, we are set for rapid global expansion."
Should you invest?
I think this is another very positive development for the company and sets itself up well to compete with A2 Milk Company Ltd (ASX: A2M) and Bellamy's Australia Ltd (ASX: BAL).
Whilst it is too soon for an investment for me, I'll be keeping a close eye on its sales growth in the coming months.
