The Bubs Australia Ltd (ASX: BUB) share price could fall lower in early trade after completing an acquisition and announcing a capital placement to C2 Capital Partners.
What did Bubs announce on Thursday?
Before the Easter break, Bubs announced that all conditions precedent have been met for the acquisition of Australia Deloraine Dairy Pty Limited and its planned placement to C2 Capital partners has been completed.
Bubs also announced that Managing Partner of C2 Capital Partners, Steve Lin, has been appointed Non-Executive Director on the Bubs Australia board with Alibaba being an anchor investor in C2 Capital Partners.
Bubs Australia's Chairman, Dennis Lin, said that the company is now well placed to advance its vision of being a leading player in the infant milk formula and infant nutritionals markets both here and overseas, especially in China.
Bubs Australia believes the Deloraine acquisition is a vital part of its vertical integration strategy to enable Bubs to export its infant formula products to China to be sold in physical Mother and Baby stores.
The off-market share transfers by NuLac Foods Vendors to C2 are expected to complete on 23 April 2019 with C2 to have an aggregate 15% holding in Bubs Australia post-transaction.
Is Bubs in the buy zone?
The Bubs Australia share price has rocketed 69.6% higher on strong earnings and general tailwinds for Aussie dairy infant formula companies primarily from China.
The biggest player in the market, The A2 Milk Company Ltd (ASX: A2M) has seen its share price climb 40.9% higher year-to-date (YTD) while Bellamy's Australia Ltd (ASX: BAL) is up 24% this year.
So far this year, fellow upstart Wattle Health Australia Ltd (ASX: WHA) is down 20.9% which shows that investing in infant formula requires careful analysis of each company's business model and growth prospects.
I'm not bullish on the sector at the moment given the significant regulatory risk that exists with these companies waiting for approval from the Chinese State Administration for Market Regulation.
For those who want to look elsewhere for growth, this top-rated stock could boost portfolio gains as it continues to soar in a $22 billion industry.
