London beauty innovator acquires hair and skin care supplier for £23m

London based beauty innovator Revolution Beauty Group plc has acquired the entire issued share capital of Medichem Manufacturing Ltd for £23m.

Medichem is a long-standing supplier of haircare and skincare products to Revolution Beauty, manufacturing all products from its UK facility. Medichem’s end-to-end operations include an R&D laboratory, bulk manufacturing, warehousing and distribution, and employs more than 170 people.

During its last financial year to December 31 2020, Medichem reported audited revenues of £13.4m and profit before tax of £1.6m. Medichem has a limited number of customers other than Revolution Beauty, contributing in excess of 90 per cent of Medichem’s revenue in the calendar year to date.

The acquisition is subject to a net assets adjustment by reference to completion accounts and will enable the group to enhance margins, increase control of its supply chain and enhance productivity. The company expects the acquisition will be significantly earnings enhancing for the financial year ending February 28 2023.

As disclosed in the Company’s Admission Document dated July 13 2021, Revolution Beauty entered into a call option arrangement whereby it obtained the right to acquire the entire issued share capital of Medichem for £23m post completion of an independent due diligence and valuation process managed by the non-executive directors of the Group.

The consideration due of £23m will be payable in instalments, with £7m payable in cash on completion from the group’s current cash resources, and the balance payable in equal annual £4m instalments over four years (together with an amount equivalent to interest accrued thereon at the rate of 2.5 per cent per annum).

The cash consideration payable will be subject to a post-completion net assets adjustment (up to an additional amount capped at £4.5m) by reference to completion accounts. The Board of Revolution Beauty expects Medichem will contribute £3m of incremental pre-tax profits to the group for the financial year ending February 28 2023.

Adam Minto, CEO and joint founder of Revolution Beauty Group plc, said: “The intention to acquire Medichem was disclosed at the time of our IPO, and I am pleased to announce today that we are delivering against our strategy and exercising our option to acquire this highly-complementary manufacturing business.

“By vertically integrating Revolution Beauty in this way and taking manufacturing in-house for the first time, we will have even more control of our supply chain, allowing us to improve productivity, our cost base and margins, while being earnings accretive.”

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