Change of name: Halo Food Co Limited, page-11

Hello TripleTop,

Like all, of the acquisitions that have occurred with Keytone.

They have, a clear passion to overpay for so called market performers. They like to utilise wording, such as "Strategic Opportunity" to aid in the diversification strategies.

All the purchases, they have made of the strategic performers are also debt laden.

WOW, that is strategic. Buy so called proven, market performers with debts and so called market shares and annual turnovers.

BLAH, BLAH DE BLADDY BBBBLLLAAH.

KEYTONE TO ACQUIRE SUPER CUBES

ASX Announcement – 18 September 2019

Keytone Dairy Corporation Ltd (ASX:KTD) (“Keytone” or the “Company”) is pleased to announce that it has today executed a binding agreement (“Agreement”) for the strategic acquisition of the assets, brands and business of 40Forty Foods Pty Limited, trading under the Super Cubes brand (“Super Cubes”), for $726,000 plus an earn-out subject to performance milestones (the “Acquisition”).

Highlights

• Keytone to acquire 100% of Super Cubes, subject to satisfaction of conditions precedent
• Super Cubes is a premium Australian consumer lifestyle health and wellness brand - the first of its kind in the marketplace
• Super Cubes has a strong core product range and a growing national distribution network, including national ranging in Woolworths, 400 independent supermarkets, and an increasing online presence with over 15,000 unique visits to the Super Cubes website per month
• In FY19, Super Cubes first full 12 months of trading, the business realised sales of approximately $650,000, with significant distribution and sales only achieved in the last quarter of FY19
• Purchase price of $120,000 cash, settlement of $463,000 of Super Cubes existing debt, deferred cash payment of $143,000 payable over 2 years plus the issue of performance shares convertible into Keytone shares dependent on substantial increases in Super Cubes performance over the next three years
• Transaction acquisition multiple of 1.4x FY21F EBITDA1
• The strategic Acquisition accelerates Keytone’s growth into high value, high margin proprietary products
• Super Cubes products hold a 5-star health rating and have a unique and innovative product pipeline
• Keytone will fund the Acquisition via existing cash reserves and the issuance of equity with no capital raise required
• Completion is expected to occur in the short term, subject to satisfaction of conditions precedent

Following the signing of the Agreement with Super Cubes,Keytone’s Chairman, Peter James, commented “The acquisition of Super Cubesdemonstrates swift and clear execution of the branded product growth strategyfollowing the acquisition of Omniblend. Super Cubes is a growing brand in thehealth and wellness sector with impeccable health credentials and a growingdistribution footprint. It is well positioned for rapid growth domestically andinternationally, given its first-class product portfolio, existing penetrationin distribution channels and senior executive talent.”

“The Acquisition offers a number of synergistic benefits, not least of which isthe effective overnight implementation of a senior branded sales team to drivesales in both the Super Cubes product portfolio as well as other Omniblendbranded products, including the Tonik range.”

Keytone’s Chief Executive Officer, Danny Rotman, stated “Super Cubes is anexceptionally attractive acquisition for Keytone. The brand is a fast growing,highly appealing range of products for the health conscious, time-poor,consumer.”

“The acquisition fast tracks the strategic priority and development of theOmniblend branded product portfolio through the on-boarding of the Super Cubesexecutive team, matching their skills and depth of experience in branddevelopment and sales, with Omniblend’s leading in-house product developmentexpertise.”

“Further, Keytone will be able to leverage its existing distribution channelsin core markets, including China, to grow the Super Cubes brand internationallyexecuting on the early-mover advantage in the health and wellness sectorglobally.”

“We are excited to welcome Ash McMillan to the team. Ash has a long andsuccessful track record in developing and growing strong brands in the healthand wellness sector. We look forward to further updating the market on thesuccesses of the combined businesses.”

Acquisition Details
Keytone has today executed the Agreement to acquire 100% ofSuper Cubes.

Super Cubes, founded in 2018, is an Australian consumerlifestyle health and wellness brand, the first of its kind in the marketplace.The first and flagship product range is nourishing, all natural, frozen cubesof fruits, vegetables, plant- based protein and highly nutritious ingredientsfor a nutrient enriched smoothie across multiple product SKUs.

There is a full pipeline of new product development, including the “permissibleindulgence” range of Super Cubes smoothies, Super Tubes Icy Poles and SuperCubes Wholefoods Bars. These new products are being dispatched to storesthroughout October 2019 and are expected to provide significant upside to theperformance of the Super Cubes business moving forward. In addition, the SuperCubes team has a developed pipeline of innovative new products expected to becommercialised over the short to medium term.

Ash McMillan, the founder of Super Cubes, has over 12 years’ experience indeveloping and significantly scaling proprietary product portfolios in thehealth and wellness sector to become leading brands in the Australianmarketplace. Ash leads a team of senior sales and branded executives, who havedriven Super Cubes product penetration into Woolworths nationally, 400independent groceries across Australia and developed a proprietary website withmore than 15,000 unique visits per month.

Super Cubes commenced trading in the last months of FY18 (30 June year-end). InFY19, the first full 12 months of trading, Super Cubes realised sales of$650,000, with major growth in distribution channels, including Woolworthsranging, occurring in the last quarter of the FY19 year. In the two months todate in the FY20 year, Super Cubes has achieved 40% of FY19’s full year result.

Upon completion, Keytone will pay 40Forty Foods Pty Limited, the owner of SuperCubes, an upfront consideration of $120,000 in cash, repayment of $463,000debt, and deferred cash consideration of $143,000 payable over 2 years.Additionally, Keytone will issue shares under an earnout, where Super Cubesachieves certain strategic and financial milestones. Specifically, they willreceive performance shares which will convert to:

Up to 650,000 Keytone shares where Super Cubesachieves national ranging of Super Cubes products in identified distributionchannels by March 2020 - 500,000 shares in Keytone (subject to a 2 year escrow)and an additional 150,000 shares (no escrow) at the end of the financial yearin which the ranging is achieved;

▪ Upto 2,200,000 Keytone shares where Super Cubes achieves $20.0m of sales byMarch 2021- 2,000,000 shares in Keytone (subject to a 2-year escrow) and anadditional 200,000 shares (no escrow). Where sales of greater than $15.0 m andless than $20.0 m are achieved in such period, 750,000 Keytone shares (subjectto 2-year escrow) and an additional 100,000 shares issued (no escrow) to beissued on the same terms

▪ Upto 3,300,000 Keytone shares where Super Cubes achieves $35.0m of sales and$5.0m EBITDA in Omni Brands by March 2022 - 3,300,000 shares in Keytone(subject to a 2-year escrow). Where sales in Super Cubes of greater than $27.5mand less than $35.0 m are achieved and EBITDA of more than $4.0m in Omni Brandsis achieved in such period, 1,500,000 shares in Keytone (subject to a 2-yearescrow) to be issued on the same terms.

Completion of the Acquisition under the Agreement is conditional upon thesatisfaction of the following conditions precedent (among others):

• Completion of full due diligence by Keytone on the assets, the business and the shareholders of 40Forty Foods Pty Limited to the satisfaction of Keytone;
• Approval from ASX in respect of the proposed structure and terms of the performance shares to be issued;
• Assignment of all material contracts pertaining to the business to Keytone;
• Keytone entering into executive services agreements with each of the key employees of Super Cubes including Ashley McMillan;
• The parties entering into a formal Asset Purchase Agreement; and
• The parties obtaining all necessary ASX, shareholder, board, regulatory or third-party consents and/or approvals required to complete the transactions contemplated by the Agreement and Asset Purchase Agreement.

Strategic Rationale
The Board and Keytoneexecutive team believe the acquisition of Super Cubes is highly strategic withstrong financial rationale and in-line with the Company’s stated growthstrategy. Further it substantially fast-tracks the Company’s key strategicpriority of developing its own high value, high margin proprietary productsuite.

The key strategic highlights include:

Health Halo Brand

• Strong, fast-growing health and wellness brand
• Ability to leverage unique product offering into international markets, including South-East Asia and China
• Uncompromising first-class health credentials and ingredients, including 5-star health rating

Established Distribution Channels

• Three established channels to market, including:

1. Independent Grocery – ranged in 400 independent groceries nationally
2. Major Grocery – national ranging in Woolworths
3. Super Cubes website – 15,000 unique visits to the website per month and growing

• Existing strategic channels grow brand equity and brand awareness whilst simultaneously driving social media following
• New distribution channels and ranging targeted over short to medium term:

1. Petrol & Convenience – range review meetings scheduled for Q4 2019 calendar year
2. Pharmacy – range reviews meetings scheduled for Q4 2019 calendar year

• Ability to leverage Keytone’s existing distribution channels for growth in core markets, including China

Innovative Product Range

• Core Super Cubes smoothies range established and growing
• Introduction of ‘permissible indulgence’ smoothie range being rolled out nationally
• Innovative Super Tubes (Icy Poles) and Super Cubes Wholefoods Bars range being rolled out to existing distribution channels through Q4 2019 calendar year providing significant growth and upside
• Innovative new product pipeline to be commercialised through 2020 and beyond

Expertise

• Ashley McMillan has more than 12 years’ experience in significantly growing branded products in the health and wellness sector
• Proven sales capability and track record with established brand and national distribution expertise
• Highly complementary team to drive Keytone’s strategic priority of growing higher value, higher margin proprietary product suite

Manufacturing Upside

• Omniblend will bring the manufacture of certain Super Cubes product lines in-house over time, providing additional margin accretion in the medium term

Funding

The transaction is tobe funded via existing cash reserves and equity, with no debt funding. Futuremilestone shares are to be issued under the Company’s placement capacity.

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For Further Information
Jourdan Thompson
Chief Financial Officer, Keytone Dairy Corporation Limited Email: [email protected]
Tel: +612 9969 9690