Why the Youfoodz share price skyrocketed 77% on Tuesday

The relatively unknown Youfoodz (ASX: YFZ) saw its share price skyrocket on Tuesday, opening 78% higher, after announcing it had entered into an acquisition agreement with HelloFresh.

Under the proposed Scheme Implementation Deed (the agreement), HelloFresh intends to acquire 100% of Youfoodz outstanding stock, in an all cash deal at 93 cents per share. That, as management was keen to point out, represents a significant premium to where the stock last traded at as well as its one-month volume weighted average price.

The offer price of 93 cents per share implies a total equity value of $125.3 million for Youfoodz. The stock closed out the session up 77% to $0.905 per share, just shy of the takeover bid price.

The Board said it unanimously endorses the takeover offer, arguing that it is in the best interests of the company for shareholders to vote in favour of the arrangement. All of Youfoodz’s directors are expected to vote in favour of the agreement.

The board noted that the agreement had few conditions, including the above mentioned shareholder approval, court approval and there being ‘no material adverse change’ to the company.

More substantially, RGT Capital – which owns 57.4% of Youfoodz outstanding stock, is understood to be set to vote in-favour of the takeover offer; assuming that a superior offer does not arise.

Youfoodz noted that shareholders currently do not need to make a decision in regards to the takeover offer.

The timeline

Looking at the expected timeline for all of this, the company said it was set to appoint an independent expert who would be tasked with determining and subsequently releasing a report on, whether the takeover is in the best interest of shareholders.

Such a report would be included in a Scheme booklet, which is anticipated to be sent to shareholders by September.

Shareholders are expected to get a chance to vote for or against the scheme in October.

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Different but similar

Despite being relatively unknown prior to today’s announcement, Youfoodz has grown in popularity over the last few years, serving over 60 million ready-made meals to its customers since 2012.

With operations based in Brisbane, Australia, Youfoodz has access to a database of over 850 thousand customers, and touts a dynamic business model which focuses on both a direct to customer and a direct to business model.

Hellofresh operates in a similar, though differentiated space. The company 'describes itself as 'the world's leading meal-kit company’ and operates in a variety of markets, including the US, Australia and the UK. During the first quarter of 2021 alone, the company said it 'delivered 239 million meals and reached close to 7.3 million active customers.'