Moonpig looks to acquire Smartbox

(Sharecast News) - Shares in online greetings card retailer Moonpig surged early on Monday after the firm announced the proposed acquisition of Smartbox Group for £124.0m in cash as part of an effort to accelerate its strategy of becoming "the ultimate gifting companion".

Moonpig said on Monday that the addition of Smartbox, trading as Buyagift and Red Letter Days, would give the firm "the UK's leading range of physical and experiential gifts" and deliver a step-change in its gifting proposition.

The FTSE 250-listed firm added it would unlock the growing £6.0bn UK gift experiences segment of the gifting market, leverage its proprietary dataset on gifting intent to drive highly relevant gift recommendations across thousands of new products, unlock potential for digital delivery of gifts, and the same-day gifting market, and also offer network effects as gift redemptions bring recipients into the Moonpig ecosystem.

Smartbox currently has 3.3m customers across the two long-established brands.

Moonpig stated the transaction was "financially attractive", with the business generating unaudited underlying earnings of £14.0m in the 2022 trading year. Medium-term targets for annual revenue growth were in "the mid-teens" in terms of percentage.

The acquisition was also expected to be margin accretive, leading Moonpig to raise its medium-term adjusted underlying earnings margin rate target to between approximately 25.0% and 26.0%

Chief executive Nickyl Raithatha said: "The proposed acquisition of Buyagift rapidly accelerates Moonpig Group's journey to become the ultimate gifting companion. There is strong strategic rationale for the transaction, and compelling financial benefits.

"Buyagift is profitable and highly cash generative, with a proven track record of strong growth and we are excited by the ways that we can further transform the business using the group's proven playbook. We see significant potential for the cross-selling of gifting experiences to Moonpig group's loyal customers."

As of 0840 BST, Moonpig shares were up 13.13% at 265.85p.

Reporting by Iain Gilbert at Sharecast.com