Kogan.com has acquired 100 percent of NZ online retailer Mighty Ape for $128 million.
The sum will be paid over four tranches and is funded entirely from Kogan’s cash reserves, the company told the ASX.
Mighty Ape founder and chief executive Simon Barton will stay on as part of the deal until at least the end of the 2023 financial year. The company is predicted to have successfully weathered covid and the shift to online shopping, with forecast 2021 financial year revenue of A$137.7 million, an annual growth rate of 43.7 percent from A$95.8 million.
On an investor call, Kogan chief operating and financial officer David Shafer confirmed the plan is to keep the Mighty Ape brand, one he referred to frequently as “iconic.”
“We’re not fixing something that’s broken, we’re taking something that’s already incredible and making it better,” he said. He said a significant amount of its business is driven by customers who buy more than 10 items per year.
Kogan said more than 70 percent of Mighty Ape’s orders in the 12 months to October were made by repeat customers.
Kogan predicts Mighty Ape’s full-year 2021 gross profit will be A$45.7 million – up 58.1 percent from A$28.9 million – with earnings before interest, taxes, depreciation, and amortisation at A$14.3 million, up 254.1 percent from A$4 million.
“Mighty Ape will give us significant scale in New Zealand and further strength across a variety of operational dimensions,” Shafer said.
“We will be drawing on Mighty Ape’s deep experience in gaming, toys, other entertainment product categories and the New Zealand market, and combining this experience with Kogan.com’s sourcing, technology, systems, infrastructure, and marketplace capabilities, to further enhance the group’s already market-leading offering across the Tasman.”
On the investor call Kogan chief executive Ruslan Kogan commented, “This is a 1+1=3 opportunity and it’s a massive win for both businesses ... we will be able to delight customers in more ways to the benefit of our shareholders as well.”
In a statement, Barton said the Mighty Ape team was very happy to be joining forces with Kogan, but he was not available for an interview.
"Combining with Kogan will assist Mighty Ape to expand our product range and improve our customer experience. I am excited about working with Ruslan and David, and the broader Kogan.com team who have built an incredible business."
Barton and wife Vicki Barton are the sole directors of the business. The family holds the majority of the company's shares.
The executive team will be grated retention options to provide incentive to remain and grow the business.
Founded in 1995 as Gamezone, Mighty Ape rebranded in 2008 and has grown to become one of New Zealand’s largest online retailers with a focus on home electronics. As of Oct. 31, it had 895,000 subscribers, and claims more than 690,000 unique customers in the 12 months through October.
It has 161 staff, and its distribution centre is in Auckland.
Mighty Ape offers overnight delivery to anywhere in New Zealand and same day delivery to Auckland, Hamilton, Wellington and Christchurch.
Kogan said the online market in NZ was worth about $5 billion annually, drawing on data from an October report by IBISWorld.
The acceleration of online shopping had been significant for domestic retailers, it said, with Kiwis spending more than 33 percent more on domestic sites in Sept. 2020 versus the same month in 2019, Neilsen data showed. It contrasted this with international retailer demand, which it said had decreased 6.2 percent in online spend year-on-year.
Last September, Kogan partnered with Vodafone NZ to bring a cheap mobile service to NZ in a mobile virtual network operator deal.