Ellinika Galaktokomeia acquires Kampos Chiou

Summary

Target: Ernst & Young (Financial Advisor)

On January 14th, Sarantis family acquired Kampos Chiou through Ellinika Galaktokomeia in an attempt to expand their product line and enter the juice market. The total consideration is rumored to be around €5 mil.

The acquisition in numbers

(per share data)	FY23	Multiple
Revenue	2.9	1.7x
EBIT	(1.2)	(4.2x)
Net Income	(1.6)	(3.1x)

By paying the price of €5 mil. Ellinika Galaktokomeia bought Kampos for 1.7 times its revenue which its line with the global soft drinks sector average of 1.8x. The EBIT multiple in this case isn’t of any use as the company recorded losses at the operating level.

The Target

Margin Analysis	FY22	FY23
Gross Margin	17.0%	18.3%
Operating Margin	-56.5%	-40.3%
EBT Margin	-71.7%	-56.2%
Net Margin	-71.7%	-56.2%

Kampos Chiou has three main product lines: i) Natural FC & NFC juices, ii) fruit drinks and iii) soft drinks. The company’s products can be found in almost every major supermarket chain in Greece such as Sklavenitis, AB Vasilopoulos and Masoutis as well as some wholesale chains such as METRO Cash & Carry. The company’s revenue was  €2.88 mil. for FY23, c.23% higher than FY22 when it was €2.34 mil., while it managed to cut its operating losses by 10.5% to €1.18 mil. in FY23.

The company increased its debt to €3.4 mil. in FY23 from €2.4 mil. the year before which combined with its negative profitability increased the debt to equity ratio to 0.95x from 0.47x. Its debt to asset ratio also increased in FY23 to 0.39x from 0.28x in FY22 indicating that a larger part of its balance sheet is financed through debt. On January 24th the company increased its capital by €0.67 mil. through the issuance of 22,335 shares at €30 each.

The juice market in Greece is dominated by a few companies, 5 of which control 93% of the market. More specifically the top juice producers are:

Company Name	Market Share
Olympos	35.8%
DELTA	20.0%
Private Label	16.2%
Christodoulou Family	11.7%
Coca-Cola 3E	9.2%
Kampos Chiou	5.7%

Outlook

Ellinika Galaktokomeia bought Kampos Chiou to expand their product line in the juice market in Greece. We believe that the acquisition will turn out to be compatible with the acquirer’s strategy mainly due to the reason that Kampos is a growing brand with a solid platform for expansion. Moreover, we anticipate that Kampos will turn profitable in the mid-term as it will benefit from its acquirer’s existing distribution network, which will lead to a significant decrease of its distribution costs. Increasing Kampos’ production capacity without hindering the quality of its products will be the big “bet” of this transaction, as the company gets most of the fruit it needs from its own fields and turns to third parties to cover the rest of its needs. A rushed expansion will lead to Kampos’ relying more heavily on other producers to get the raw materials for its juices and soft drinks, which could possibly lead to a drop on quality.