The company currently generates $30 million in revenue turn over and has market presence across the Japanese and South Korean markets. The acquisition is expected to be FY14 neutral on the EPS line. However, ANN believes the takeover will be ‘meaningful’ over the coming financial years with the acquisition expected to be accretive as of FY15 and ramping up in FY16.
The acquisition is not surprising considering the very muted FY13 results for the HyFlex division that saw organic growth stall. The company saw organic growth of just 1% in HyFlex in FY13 with ANN’s acquisitions programme offsetting this anaemic growth driving revenues up 9%. This compares to sexual wellness that climbed 3% and medical that grew by 4%.
ANN will be hoping Midas has the touch its name alludes to once synergies are reached. The HyFlex glove and plastics division makes up 40% of total EBIT. The decline in HyFlex, particularly in Asia and Europe, has been concerning for ANN’s and this acquisition follows its current mantra of buying its way out of the flat spots.
With ANN’s sexual wellness and GBU medical products moving in the right direction, although quite sluggishly, acquisitions in this part of the business are also a possibility. Considering the uptake in sexual wellness products in full developed markets ANN would do well to look to Asian and European markets.
We do see FY14 being a stable year for earnings but the methods of deriving this revenue do not look settled and we therefore believe further purchases are on the cards.