The terms of Splash Beverage Group’s move to buy JEM Beverage Management Company, the owners of Western Son vodka, have been revised.
Splash Beverage first announced a letter of intent to acquire the assets in 2023 and said yesterday (3 February) the companies had changed the terms of the proposed deal.
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The businesses have outlined an agreement that Splash Beverage described as “primarily a stock-for-equity transaction”. They had lined up a “majority cash-based acquisition”, the company said.
Under the new terms, Western Son shareholders will receive “restricted stock” in Splash Beverage and “an approximate 10% of cash consideration”. In return, Splash Beverage will take on “certain outstanding debt obligations” of Western Son.
Like the initial deal, the updated letter of intent centres on Splash Beverage acquiring 100% of JEM Beverage Management Company, including Western Son, Erin King, VP of brand marketing and on-premise at Western Son, told Just Drinks.
“No one was unhappy with the initial LOI terms. Western Son and Splash see additional opportunities in the deal and have modified the terms to align with those opportunities,” King said.
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By GlobalData“With the transaction taking a little longer than expected, the additional time has allowed both parties to develop a stronger relationship, which has presented opportunities that were not considered in the initial LOI. The latest LOI allows Western Son investors to have a higher benefit from the experience that the Splash leadership team brings to the brand.”
The companies are targeting concluding the deal in the first quarter of the year. The acquisition is expected to nearly double Splash Beverage’s trailing 12-month revenue, the company said.
In the 2023 calendar year, the group generated revenues of $18.9m, versus $18.1m a year earlier. It booked a net loss of $21m, against $21.7m in 2022.
In a statement, Western Son president Carlos Guillem said: “This strategic move strengthens our foundation for continued expansion, enhances our market presence and reinforces our commitment to delivering the exceptional quality our consumers expect.”
Splash Beverage owns a portfolio of alcoholic and non-alcoholic beverage brands, including Copa di Vino wine by the glass, Salt Tequila and Pulpoloco sangria.
Commenting on the updated LOI, Splash Beverage CEO Robert Nistico said “structuring the deal as an equity exchange gives us a clearer path to completion”.
“We believe our shareholders are very much in favour of this as it adds significant revenue and operational efficiencies, shortens our path to profitability, and will be accretive,” he added.
Splash Beverage filed its 10-K for 2023 in March last year. Two weeks later, the company issued a statement to “acknowledge concerns regarding the going concern status published in the recent 10-K”.
It added: “We want to assure our stakeholders, including shareholders, employees, customers, and partners, that we have actively been taking measures to address these concerns and strengthen our financial position. Despite the challenges posed by limited operating capital, the company remains confident in the underlying strength of our business model, the dedication of our workforce, and our ability to adapt to changing capital market conditions.”
