Mobility accessories distributor Cellnet has entered into an agreement to acquire NSW-based gaming software and accessories distributor Turn Left Distribution (TLD) for $6 million.
Payment for the acquisition will be made up of $4 million in cash and 5.4 million in Cellnet shares - worth a further $2 million.
The sellers are also entitled to receive earn-out payments of up to $2 million cash and further incentive and overperformance payments, based on Turn Left meeting specific financial requirements for FY19 and FY20.
The acquisition will play a key part of Cellnet’s growth strategy in Australia and New Zealand. Turn Left has been operating for the past six years, providing gaming software and accessories across the Australia and New Zealand retail channel, which includes JB Hi-Fi; EB Games; Target; Big W and Harvey Norman.
Some of its brands include Capcom, Koei Tecmo, Konami, Steel Series, Thrustmaster and Plantronics.
Cellnet CEO Alan Sparks said the gaming market, which includes accessories and software, is experiencing high worldwide growth and is an ideal addition to the business, providing further expansion and product diversification as part of its growth strategy.
“This is an exciting time for Cellnet as we are entering a category adjacent to our own and at the same time becoming more relevant to our trading partners,” Sparks said.
“It provides Cellnet with the opportunity to lean on our distribution and category management expertise. This acquisition is a great fit for our current clients and a solid foundation for us to expand our reach.”
Under the terms of the agreement, TLD CEO Paul Elliot and general manager Belinda Campos, will be retained as Turn Left executives.
“Cellnet offers an exciting opportunity for Turn Left to further strengthen its services, expanding across the interactive entertainment space and beyond,” Elliot added.
For the financial year ending 30 June, Cellnet net profit after tax increased 193 per cent to $5.9 million and revenue increased 5.83 per cent to $87.5 million.
At the time, chairman Michael Wendt said the company was well poised to grow via acquisition as it continued to evaluate opportunities which align with its strategy.
"Our category management approach has differentiated Cellnet from its competitors and is assisting our customers to improve their profitability and end user offering," Wendt said.
In February, Cellnet revealed it had concluded a transaction with a strategic investor, JEJ, taking on an 11.4 per cent share in the distributor. JEJ is associated with Taiwanese accessories distributor, Cybernetic.
Cellnet also concluded an agreement with its major shareholder, Wentronic Holdings, giving Cellnet a 49 per cent stake in a joint venture company incorporated in Singapore - Wentronic International, to promote the sales of its brands such as 3SixT and Goobay brands in markets outside of Europe, Australia and New Zealand.
Cellnet was trading at $0.38 on the Australian Securities Exchange at the time of publication.