M&A is an enormously important avenue for growth, especially for small and micro-cap stocks. We generally focus on recent deals in this space because it’s an extremely useful window through which to spot important opportunities and shifts in the landscape.
With that in mind, we would point your attention to Gentech Holdings Inc (OTCMKTS:GTEH) this morning following the company’s announcement that it has now acquired “all of the assets, including inventory, revenues, goodwill, intellectual property, trade secrets, and trading relationships, of Sinister Labs, LLC, and its popular Sinfit Nutrition brand, a top-5 functional food brand currently sold in over 2,500 GNC locations in North America and over 10,000 global physical and e-commerce stores across more than 10 countries around the world.”
Complementarity
This is potentially a big deal because it marks a turning point for GTEH, driving the story immediately into “commercial stage” operations. But, more than that, it promises to create a great deal more out of the pieces that were already in place.
If you aren’t familiar with Gentech Holdings Inc (OTCMKTS:GTEH), the big story prior to this announcement is its “Secret Javas” line of high-end premium subscription coffees, which can be ordered in either CBD-infused or non-CBD-infused varieties, and which come sourced from the company’s partner farm in Brazil – said to be a genuine gourmet affiliation.
In any case, this line of products was just launched a couple months ago and is working now to get off the ground and gain in market share and popularity.
What makes this acquisition deal so interesting is the fact that Sinfit already has in place a massive distribution network and strong relationships with some of the most important distributors in North America. The overlap between the functional foods market and the CBD beverage space is more powerful than you might think. The link is the notion of “wellness” products. The same folks that tend to get excited about going to GNC also get excited about that morning cup of coffee with CBD and protein infused into the mix.
“Sinfit Nutrition isn’t just a top brand with a strong global sales track record,” commented David Lovatt, CEO of GenTech. “It’s also a prime distribution footprint that overlaps with our Secret Javas product line with exceptional synergy in terms of end market definition. We hope our shareholders can see what we acquired here: Strong and growing revenues. Thousands of stores and e-commerce sales channel relationships for Sinfit products as well as current and future Secret Javas products. And a strong built-in relationship with the largest sports nutrition and supplement distributors in North America. In addition, we have already assembled a top sales team with over 20 years’ experience in the sports nutrition and supplement market to drive expansion looking ahead.”
For a Song
We would also note another dynamic: the age of distressed assets is upon us. The pandemic made sure of that. Many businesses are folding or divesting or running for the exits in a barrel-bottom asset sale right now. And to the acquirer go the spoils – we can assume that Sinfit was likely looking at a drop in sales in 2020 relative to 2019. But that really says nothing about the long-term potential of the Sinfit brand or the marketplace it serves. Everyone gets a free pass on this one from the analysts.
That puts a likely premium on the acquiring entities right now.
By that logic, one should see this as GTEH picking up a cheap ticket to immediate strong top-line data and a gigantic distribution footprint that will likely cross-pollinate its Secret Javas growth curve, especially given the company’s announced plans to launch an RTD version of its coffee products.
We would also point to this element of the company’s press release: Lovatt continued, “Now that we have completed this strategic move, one of the steps I am most excited about is the upcoming launch of an additional product line that is part of this acquisition and that carries with it an existing successful brand identity. We look forward to providing further details very soon. We are committed to launching this new line of products within the next four weeks.”
That suggests additional catalysts on the way.
