Vodka Blokes Scent Growth

Vodka Blokes Scent Growth

Ecoya IPO seeks $10 million

The vodka blokes who took 42 Below to the world via a stock market listing and then sold it to Bacardi are re-entering the public arena.

Former 42 Below executives Geoff Ross, Grant Baker and Stephen Sinclair, and former 42 Below Australia head Craig Schweighoffer, are the key executive directors behind Ecoya Limited, a body and bath and home fragrance business. Ecoya's operating subsidiary was established in on the shores of Botany Bay Sydney, in April 2004. Craig Schweighoffer is CEO.

Ecoya uses natural ingredients to create environmentally friendly products for consumers and their homes. The prospectus seeks funds to grow Ecoya's international markets targeting the "Eco Luxe" segment of the body and bath and home fragrance markets.

Ecoya's prospectus was registered on 25 March 2010. It is offering 10 million shares at $1.00 each to the public in New Zealand and Australia with the option to accept oversubscriptions of up to a further 3.0 million shares.

Ecoya is being advised by investment bankers, Cameron Partners Limited, and lawyers Chapman Tripp. It also has the support of brokers, First NZ Capital Limited and Craigs Investment Partners Limited, who are the co-managers of the public share offer.

Allocations and Partial Underwriting

The allocation of shares is intended to be via:

* a public pool of 1.5 million shares;
* a pool of 2.5 million shares for the independent directors and certain private investors known to the directors and their associates. The independent directors have agreed to apply, in cash, for $425,000 of shares.

* a pool of 6 million shares for allocation to NZX firms and selected institutional investors.

The Business Bakery LP[1] is underwriting $2 million[2] of the pool of shares allocated to private investors known to the Directors and their associates.

Existing substantial shareholders, The Business Bakery LP and Paunui Holdings Pty. Limited (Craig Schweighoffer's company)[3], are restricted from selling their shares until after Ecoya has released to NZX its financial results for the year ended 31 March 2011.

Ecoya is reserving the right to alter the allocations at its discretion and may allocate up to an additional 3 million shares if the offer is over-subscribed.

Investors through the IPO will also receive one warrant for every two shares allotted to them. Each warrant will, on exercise, entitle the holder to one ordinary share in Ecoya exercisable at $1 per share. Half the warrants will be exercisable up until 15 December 2011 and the other half up until 15 June 2013.

If the IPO is fully subscribed, Ecoya will have an issued capital of 43.7 million shares (excluding oversubscriptions and shares and warrants earmarked for an employee share scheme) and 5.3 million warrants (excluding oversubscriptions and employee shares).

In March 2010, Ecoya wrote to all former 42 Below shareholders in New Zealand inviting them to pre-register to receive the prospectus and they can participate in the public pool.

The offer opens on Monday, 29 March 2010 (9 April 2010 in Australia) and closes on Monday, 26 April 2010. Proceeds are primarily earmarked to grow markets, recruit staff, invest in infrastructure, provide working capital funding and repay bank debt of $1 million.

Billion dollar markets

The global body and bath market is estimated to be worth around US$22 billion a year in 2009 and is forecast to grow to around US$25.5 billion a year by 2013[4]. The US home fragrance market is predicted to be worth US$6 billion a year by 2012[5].

Ecoya was founded in Australia and Craig Schweighoffer invested in the business in 2006. The Bakery took a shareholding in February 2008 and Schweighoffer became CEO.

The offer represents an opportunity to invest in a growing business with an international strategy and an experienced management team, the prospectus states. It says Ecoya has experienced strong growth since the 42 Below founders invested, with revenue increasing by 77 percent to $3.9 million in the 12 months to 31 March 2010.

The company predicts revenue growth of more than 100 per-cent in the 2011 financial year with revenue of $8 million. Gross profits of $1.2 million and $3.9 million are predicted in 2010 and 2011 but operating expenses are expected to result in losses of $2.3 million and $5.2 million (including non recurring IPO expenses of $416,000) in the same periods.

Growth category

Executive chairman Geoff Ross says the company is targeting a growth segment within a growth category.

"Ecoya operates in a multi-billion dollar industry globally," Ross says. "The board considers that factors such as Ecoya's business performance to date, the growth forecast in the category and the brand's Australasian origins make a strong case to accelerate our growth plan."

"Basically we've decided a public company structure with visible reporting and good governance suits the strategy and will help build brand profile and instil confidence among suppliers," Ross says.

"The board and management team has a strong track record in growing consumer brands. We have also attracted three first class independent directors in noted Australian fashion designer Collette Dinnigan, Rich Frank from the US and Air New Zealand CEO, Rob Fyfe. All bring huge marketing and business strength to the board."

Ross says the company considers the key 'battle fields' to win on are brand and distribution, areas that were fundamental to 42 Below's success. The company believes the best people to be selling Ecoya are
Ecoya people, a model that has been successfully deployed in Australia and which it anticipates rolling out in new international markets.

"Ecoya fits in to a very nice space," Ross says. "It's a high value brand in the affordable luxury segment with efficient distribution and that should help to drive a strong gross margin - probably around 49
percent on sales to 31 March 2011."

Ecoya plans to continue generating Australasian sales through its local staff and also to apply the model in international markets. Current offshore target markets are Australia, Asia, USA and the UK with the
focus on leading gift stores, home stores, department stores, hotels, spas and duty free stores.

It already has more than 600 outlets in Australia and more than 100 outlets in New Zealand stocking its products. Clients currently include David Jones and Nuance Group Duty Free in Australia and Ballantynes in New Zealand.

Ecoya products are produced in Australia and include eco-friendly scented candles, travel candles, diffusers, hand wash, hand & body lotions and soaps.

Members of the public in New Zealand or Australia may participate in the offer by requesting the investment statement dated 25 March 2010 relating to the securities directly from Ecoya, downloading it from the Ecoya website (www.ecoya,co.nz), or by contacting either of the co-managers, Craigs Investment Partners or First NZ Capital, or any NZX firm.

Application has been made to NZX Limited (a registered exchange) for permission to list the shares and warrants and all requirements of NZX relating thereto have been complied with on or before the date of this announcement. However, NZX accepts no responsibility for any statements in this announcement, the prospectus or the investment statement.

Ends

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