(Alliance News) - Brand Architekts Group PLC and InnovaDerma PLC announced on Thursday they have agreed to merge.
The two companies each also reported interim earnings, with Brand Arckitekts swinging to a loss, while InnovaDerma narrowed its own loss.
Shares in InnovaDerma were up 25% at 35.00 pence on Thursday afternoon in London, while Brand Architekts shares fell 23% to 81.50p.
Under the newly announced merger, InnovaDerma shareholders will be entitled to 7p in cash and 0.3818 of a Brand Architeks share for each InnovaDerma share held.
Based on Brand Architekts' closing price of 106.5p per share on Wednesday, the merger values each InnovaDerma share at 47.7p and the entire company at GBP13.6 million. This represents a 70% premium to InnovaDerma's closing price of 28 pence per share on Wednesday. However, the sharp decline in Brand Architekts shares on Thursday has reduced the value of the offer considerably.
Following completion, InnovaDerma shareholders will own approximately 39% of Brand Architekts and Brand Architekts shareholders will own 61%.
Brand Architekts said it believes that bringing together the two companies will create a stronger, better-scaled business. It added that the merger is expected to result in recurring run-rate pre-tax cost synergies GBP1.5 million to GBP1.8 million a year.
Separately, both companies reported a dip in revenue for the half year ended December 31, though InnovaDerma narrowed its pretax loss while Brand Architekts swung to one.
InnovaDerma reported a pretax loss of GBP1.2 million in the recent six months, versus GBP1.4 million a year before. It also reported a 9.5% drop in revenue to GBP3.7 million from GBP4.1 million a year prior.
The London-based personal care and beauty products company explained that the decline in revenue was primarily driven by ceasing loss-making sales promotions and reducing marketing investment in lower-priority brands, such as the hair removal brand Nuthing.
The second half of its financial year has historically been stronger than the first, InnovaDerma explained. It expects this to be the case again this year and so it remains optimistic that the business will continue its trajectory and return to profitability for the full-year.
Brand Achitekts swung to a loss in the six months that ended December 31, posting a pretax loss of GBP1.3 million. This was against a profit of GBP418,000 the previous year. Revenue also fell, dropping 19% to GBP7.4 million from GBP9.0 million.
The personal care and beauty company explained that the pandemic and broader macro economic and supply chain headwinds had resulted in a temporary margin squeeze and a delay in several of the brand relaunches, leading to the half's revenue drop.
Brand Architekts said it expects cost price pressures to persist in its second half but nonetheless noted progress on "a number of fronts". The London-based company continued that it remains confident in its ability to achieve its aims despite these current headwinds.
By Heather Rydings; heatherrydings@alliancenews.com
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Brand Architek. (BAR)