A leading digital-focused sustainable consumer products company is going public in a SPAC deal announced Wednesday morning.
The SPAC Deal: Certified B Corp Grove Collaborative announced a merger with Virgin Group Acquisition Corp II VGII, a SPAC backed by Sir Richard Branson.
The deal values the company at a pro forma enterprise value of $1.5 billion.
The merger is expected to close in the first half of 2022. The company will trade on the NYSE under the ticker GROV after the merger. Public VGII shareholders are expected to own 21% of the new company.
About Grove Collaborative: Digitally focused Grove Collaborative is focusing on a $1 trillion home and personal care sector ripe for disruption.
The company is a leading sustainable consumer products company with a mission to transform the industry for the good of the environment. Grove is the largest independent sustainable focused home and personal care brand.
“Grove is paving the way for people to have more access to healthy, sustainable goods for their homes and I am excited to see the company’s impact on customers’ health and wellbeing,” Sir Richard Branson said.
Grove has more than 1.5 million active customers and reports strong repeat ordering.
The company gets 90% of its revenue from its own brands and also has an incubator program to help other sustainable products expand their reach. This segment represents 10% of expected 2021 revenue.
Grove offers products in categories that include hand soap, dish soap, laundry, tree-free paper, cleaning, zero waste home and air care. The company has more than 400 SKUs.
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Growth Ahead: Grove said the transaction and funding will help with its growth plan, bring new product innovation and retail expansion.
“Consumer led transition to sustainable products is inevitable,” the company said in its presentation. A survey showed that plastic waste is the number one environmental issue to consumers, even beating out climate change in the poll.
One of the biggest items helping with Grove’s growth could be its expansion in the physical retail space. The company announced a partnership with Target Corporation TGT for inclusion in physical stores and on the Target.com website. Grove is the No. 1 new brand in several categories for all Target stores.
The company’s presentation highlights three new retail partnerships coming in 2022 from unnamed retailers.
An additional seven to 10 retailers are in discussions with Grove on carrying the products. The new confirmed retailers will provide a 157% increase in distribution points for Grove starting in April 2022. The additional retailers the company is in talks with could increase the distribution points an additional 75% to 100%.
Financials: Grove reported revenue of $364 million in fiscal 2020. The company is expected to report revenue of $385 million in 2021.
Revenue grew at a compounded annual growth rate of 54% from 2018 to 2021 for the company. Forecasts from the company see revenue growing at a compounded annual growth rate of 19% from 2021 to 2024.
Revenue from physical stores is expected to be 3% in 2021 and grow to 20% in 2024 thanks to the Target partnership and new deals coming.
Grove sees gross margins hitting 50% in 2021 and growing to 56% in 2024 with increased scale and brand awareness.
Price Action: VGII shares are up 0.36% to $9.86 Wednesday morning at publication.
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