Equity research Zinzino: Significant expansion of US business

Zinzino announced on February 14 that its bid for the assets of US direct selling company Zurvita, who has entered Chapter 11, has been accepted. Including the USD 4.5m loan that Zinzino provided to Zurvita by the end of 2024, the purchase price is USD 9.4m, of which USD 2.5m will be paid in newly issued Zinzino shares. In addition, the acquisition includes contingent earn-out payments based on sales performance from 2025 to 2029, with a maximum additional consideration of USD 1.9 million, which will also be fully settled in newly issued Zinzino shares. Notably, the total consideration is lower than initially indicated when Zinzino, in June 2024, signed a letter of intent to acquire Zurvita for USD 16.5m + USD 0.5m in potential earn-outs. Zinzino has a solid financial position and will pay for the cash portion out of its cash reserves.

Zinzino states that Zurvita has annual sales of some USD 30m. At least some part (unknown to us) already consists of the distribution of Zinzino products, e.g., Balance Oils. The acquired assets include the distribution network, inventory, intellectual property rights, and other key assets of Zurvita. Zinzino expects growth and operational efficiency synergies from the acquisition. We believe the company has a strong track record in this regard.

We will likely raise our sales estimates by some 20 per cent for 2025-2026E, depending on the date of completion, on this news and also following the robust sales reported for January 2025. While there will probably be some initial dilution to group margins from Zurvita, we expect to adjust our DCF valuation upwards accordingly. We will return with a full update at the latest following the Q4 2024 report on 27 February.

Read our Q4 2024 preview here.

Read our latest research update here.

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