Kogan.com Acquires Matt Blatt for $4.4 Million
Amid the COVID-19 pandemic, considerable attention has been placed on online retailer, Kogan.com. This is because unlike many firms who are striving to tide through the coronavirus pandemic, Kogan.com, on the other hand, continues to scale greater heights. More recently, Kogan.com has acquired furniture and homeware retailer Matt Batt for $4.4 million. Since its establishment in 1981, Matt Blatt has been an Australian icon for four decades now.
Specifically, in FY19, Matt Blatt reported $46.5 million in revenue, of which 20- 25 per cent was attributed to its online channel. Yet, under the new ownership, Kogan.com’s CEO Ruslan Kogan plans to restructure the business as an online-only offering. Mr Kogan also expects the acquisition to provide a platform for Kogan.com to venture into the space of homewares and furniture. More broadly speaking, the acquisition aims to create synergy both through Matt Blatt’s industry expertise as well as Kogan.com’s state of the art technology system.
Earlier this week, the board has revealed plans to issue $53 million worth of options to Mr Kogan as well as Chief Financial Officer, David Shafer. Using the equity market rout of recent months as a gauge, initial estimates for the package will have an exercise price of approximately $5.28 a security. The softer price was in part attributed to the coronavirus-induced sell-off between February and April. Nevertheless, the exercise price for the options has been identified as a three-month weighted average ending on 30 April 2020.
While the plan will ultimately require the approval of senior executives and directors, it is expected to deliver an approximate profit of $21 million if executed immediately. Specifically, 3.6 million options will be delivered to Mr Kogan, while 2.4 million options will go to Mr Shafer. Judging by the firm’s closing price of $8.85 on 12 May 2020, Mr Kogan’s and Mr Shafer’s options will worth $31.8 and $21.2 million, respectively. Aside to the Long-Term Incentive plan above, Kogan.com has also provided shareholders with its most recent business update. In the month of April, the firm welcomed the addition of 139,000 active customers, bringing its total customer base to that of 1,948,000. This was relative to the 62,000 active customers that have joined Kogan a month prior.
As a result of broader movement restrictions, consumers have transitioned away from shopping in physical stores to making online purchases. Consequently, Kogan.com witnessed gross sales and gross profit surging in excess of 100 per cent and 150 per cent, respectively. Like Amazon, the firm’s business model is to provide products at a more affordable price relative to its competitors while actively capturing market share. Doing so will allow Kogan.com to get a bigger piece of the pie by absorbing meagre profit margins. However, the upside for Kogan.com is that as an online-only business, it, therefore, incurs less costs than traditional retailers who ought to consider rental and manpower costs.
By Caroline Wong
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