Online retailer, Ohki has entered into a heads of agreement to purchase Sydney-based electrical goods retail outlet, Stax Electrical.
The purchase details of the acquisition have not been disclosed, but Ohki stated it did purchase the company with a mixture of cash and shares in Ohki.
The cash component will be funded by a new debt facility, and is subject to a due diligence of Stax Electrical and Ohki.
Stax Electrical has been in operation for more than 18 years and supplies large corporations in the insurance industry with new for old replacement products.
Some of the brands it carries include Nokia, Samsung, Panasonic, Toshiba, Fujitsu, HP, Brother and Sony.
Ohki stated the acquisition allows it to purchase ‘branded’ electrical products at a 15 per cent greater margin as well as significantly expand its product portfolio.
Gross margins on branded products are currently 25-30 per cent and will increase to 35-40 per cent plus additional rebates upon sales targets being met, provided by supplier’s further increasing gross margin.
It allows Ohki with access to more than 2500 products in addition to its self-branded range.
Management estimate once the purchase is completed that the combined OHKI/Stax Electrical business is expected to generate revenues more than $7 million annually.
The acquisition is expected to be completed within the next 10 weeks.
“It gives us immediate scale, a massively expanded product range and better margins on name branded products.
The payment terms of the acquisition are also geared around the performance of the business after settlement and the vendor is taking part of his consideration in shares in our company – which inspires confidence,” Ohki managing director, Lucas McEntee, said.