Marley Spoon (ASX:MMM) share price leaps 17% on acquisition news

The company is strengthening its presence in the Australian ready-to-eat meals market

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The Marley Spoon AG (ASX: MMM) share price is surging higher today. This comes after the company announced it will acquire an Australian ready-to-heat meal company.

At the time of writing, Marley Spoon shares are fetching 82 cents apiece, up 17.27%. Earlier in the day, they hit a high of 86 cents, a gain of almost 24% on yesterday’s closing price.

Marley Spoon boosts existing portfolio of brands

Investors are pushing up the Marley Spoon share price after the company revealed the acquisition will expand its addressable market.

According to the release, Marley Spoon has entered into an agreement to take over Melbourne-based ready-to-heat meal provider, Chefgood.

Offering more than 30 meals rotating every week across different subscription plans, Chefgood targets healthy and weight-conscious consumers. The company’s manufacturing facilities in Melbourne produce high-rating Australian ready-made meals.

Under the deal, Marley Spoon will acquire 100% of the share capital in Chefgood for a total purchase price of up to $21 million. This will be payable in three tranches in January 2022, September 2022, and May 2023.

In addition, there are earn-outs of up to $5.6 million over the next 2.5 years based on the achievement of revenue targets.

The acquisition is expected to give Marley Spoon a foothold in a growing and complementary category.

Chefgood is operating at a $26 million net revenue run-rate based on the 3-month period of September to November 2021. This represents a growth of 137% year on year.

Furthermore, the company is generating positive earnings before interest, tax, depreciation, and amortisation (EBITDA) and net cash flow.

The acquisition is anticipated to close in January 2022 at which the first payment tranche of $10 million is due.

Marley Spoon will fund the transaction through an $8 million equity placement, and an $11 million extension to its existing debt facility.

About the Marley Spoon share price

Marley Spoon is a leading global subscription-based meal kit provider. The company services customers in Australia, the United States, and across Europe.

In the past 12 months, the Marley Spoon share price has fallen by around 70%, despite today’s strong gains. Investor sentiment has waned in the company which has seen its shares sink by almost 50% since late October.

Based on today’s price, Marley Spoon presides a market capitalisation of $214.46 million and has approximately 284.05 million shares outstanding.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Marley Spoon AG. The Motley Fool Australia has recommended Marley Spoon AG. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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