Latest / What the Flux / Chemist Warehouse eyes $14 billion acquisition| Kmart takes on IKEA | Bending Spoons cashes in

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Chemist Warehouse eyes $14 billion acquisition| Kmart takes on IKEA | Bending Spoons cashes in · What the Flux

• 0:05
  Speaker 1: This is what the flux. I'm bred and I'm justin
• 0:07
  Speaker 1: and it's Friday, there, twelfth of June.
• 0:09
  Speaker 2: Boy, the federal budget dropped the last month and it
• 0:11
  Speaker 2: hasn't taken long to see some results.
• 0:13
  Speaker 1: Get this one.
• 0:13
  Speaker 2: Westpac say they've already seen the twenty percent fall in
• 0:16
  Speaker 2: their investor loone applications over the past three weeks, but
• 0:19
  Speaker 2: do not call it a crisis yet, call it as
• 0:22
  Speaker 2: Westpac likes to call it, a mood of concern.
• 0:24
  Speaker 1: I'm getting concerned, f man, Flux Am, It's Friday. That
• 0:27
  Speaker 1: means the Flex team. They dropped in fifty bucks into
• 0:29
  Speaker 1: one Flex app uses the Pocket. All you've got to
• 0:31
  Speaker 1: do is download the Flex app twenty notifications on, and
• 0:34
  Speaker 1: answer three business or finance questions correctly in our weekly
• 0:37
  Speaker 1: game Quick six Could it be you? This week? Download
• 0:39
  Speaker 1: the Flex app ten notifications on.
• 0:41
  Speaker 2: To win three delicious stories today, Juzzy boy, Let's do
• 0:43
  Speaker 2: it for our first. Sigma Healthcare, the owner of Chemist Warehouse,
• 0:47
  Speaker 2: is chasing a fourteen billion dollar deal to buy UK
• 0:50
  Speaker 2: pharmacy Giant Boots, the boldest move in Australian retail history,
• 0:54
  Speaker 2: or the most expensive lesson since Bunning's tried to conquer
• 0:56
  Speaker 2: the UK.
• 0:57
  Speaker 1: Oh yeah, so tell me all So.
• 0:58
  Speaker 2: Sigma Healthcare is the asexted parent of Chemist Warehouse, Australia's
• 1:02
  Speaker 2: biggest pharmacy chain with over one thousand stores nationally, The.
• 1:04
  Speaker 1: One with aisles narrower than an airline.
• 1:07
  Speaker 2: For one with a jingle that's almost impossible to get
• 1:09
  Speaker 2: out of your head and be man.
• 1:10
  Speaker 1: You may recall Sigma only became chemists Warehouse's parent last
• 1:14
  Speaker 1: year for a thirty two billion dollar reverse listing.
• 1:16
  Speaker 2: Yep, so it's still a relatively new public company finding
• 1:19
  Speaker 2: its feet now.
• 1:20
  Speaker 1: Last month we spoke about chemist ware House acquiring a
• 1:22
  Speaker 1: seventy five per cent steak in a twenty two store
• 1:24
  Speaker 1: UK pharmacy chain.
• 1:26
  Speaker 2: But Jazzi Boy Sigma is now in talks to go
• 1:28
  Speaker 2: a whole lot bigger.
• 1:29
  Speaker 1: Yeah, they've confirmed they're in talks to acquire Boots, the
• 1:32
  Speaker 1: UK's biggest pharmacy chain. How much are we talking reportedly
• 1:35
  Speaker 1: fourteen billion baccarinis now.
• 1:37
  Speaker 2: Jasi Boy Boots has eighteen hundred stores and fifty one
• 1:40
  Speaker 2: thousand employees, so this would more than double Sigma's footprint overnight.
• 1:44
  Speaker 1: And be Man. The market wasn't thrilled With this announcement.
• 1:47
  Speaker 2: Up, Sigma shares dropped five and a half percent, with
• 1:49
  Speaker 2: investors spooked by the scale of funding required to be fair.
• 1:53
  Speaker 1: Bee Man Sigamull was careful to add here that there
• 1:55
  Speaker 1: was quote no certainty a deal would actually happen.
• 1:58
  Speaker 2: Nothing like sending up a little balloon in the atmosphere.
• 2:02
  Speaker 1: So what is the key learning here?
• 2:03
  Speaker 2: A trial balloon is when you float a major strategic
• 2:06
  Speaker 2: move publicly without fully committing.
• 2:07
  Speaker 1: The goal is to gauge how investors and the market
• 2:10
  Speaker 1: actually feel about it before you pull the trigger.
• 2:12
  Speaker 2: When Sigma dropped the news about Boots, they were very
• 2:14
  Speaker 2: careful with their language.
• 2:15
  Speaker 1: No certainty any deal would be completed.
• 2:18
  Speaker 2: The market responded instantly, with Sigma shares dropping five and
• 2:20
  Speaker 2: a half percent that day and.
• 2:21
  Speaker 1: Be Man, that's investors voting with their wallets in real time,
• 2:24
  Speaker 1: and the message was we're not sure about this one.
• 2:27
  Speaker 2: So whid do you reckon? Investors are not so sure well.
• 2:29
  Speaker 1: Chemist warehouses model relies on bringing customers into the store
• 2:32
  Speaker 1: with cheap prescriptions than upselling with other items which have
• 2:35
  Speaker 1: better margins.
• 2:36
  Speaker 2: You come in for antibiotics and live with shampoo and conditioner,
• 2:38
  Speaker 2: band aids jellybeans.
• 2:40
  Speaker 1: But ninety six percent of UK patients actually receive prescriptions
• 2:43
  Speaker 1: for free, so the price advantage on scripts isn't as
• 2:46
  Speaker 1: strong over there.
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  Speaker 2: Plus the enormous execution risk of running retail in a
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  Speaker 2: market you've never operated in.
• 2:51
  Speaker 1: So b Man Sigma have essentially run a free investor
• 2:54
  Speaker 1: survey and the response wasn't great.
• 2:56
  Speaker 2: If the deal falls over, they can say they were
• 2:58
  Speaker 2: always just exploring.
• 3:00
  Speaker 1: Second story. Kmart is opening a massive furniture showroom called
• 3:04
  Speaker 1: k Home to grab a bigger slice of the furniture market.
• 3:07
  Speaker 2: Kmart coming for IKEA's flat pac Empires.
• 3:09
  Speaker 1: Tell me more. Okay. So Kmart's Australia's most popular discount
• 3:12
  Speaker 1: department store owned bo West Farmers.
• 3:14
  Speaker 2: We're talking over three hundred stores around Australia with over
• 3:16
  Speaker 2: eleven bill in revenue for the last financial year.
• 3:19
  Speaker 1: And be man. Kmart's private label Anko is a huge yep.
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  Speaker 2: It accounts for more than eighty five percent of k
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  Speaker 2: Mart's total sales and sells over a billion items across
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  Speaker 2: Australia every year.
• 3:29
  Speaker 1: And Man, that brand somehow convinces us he's they need
• 3:31
  Speaker 1: a waffle maker polight, he's ring linen spray rechargeable lamb
• 3:34
  Speaker 1: and a dog raincoat all in the same basket.
• 3:37
  Speaker 2: Now kmart wants a bigger piece of your living room.
• 3:39
  Speaker 1: Yeah, they announced plans to launch a standalone furniture concept
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  Speaker 1: store called k Home hop. That one Ikea yea, but
• 3:45
  Speaker 1: hold your horse has been manned because the concept store
• 3:47
  Speaker 1: is still much smaller than a typical Ikea store, but
• 3:50
  Speaker 1: it will be a full showroom experience with bulkier items.
• 3:53
  Speaker 1: I'd be thinking mattresses, couches, shelving, a little bookcase. And
• 3:56
  Speaker 1: the plan is to steal some of the furniture market
• 3:59
  Speaker 1: from the ikeas Amart's freedom.
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  Speaker 2: Camart's currently calling it a trial, but if the Melbourne
• 4:04
  Speaker 2: pilot works, K home could be rolled out nationally.
• 4:07
  Speaker 1: All part of their plan for some inspirational retail.
• 4:10
  Speaker 2: So what's the key learning here?
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  Speaker 1: Inspirational retail is the way that a showroom tries to
• 4:14
  Speaker 1: inspire shoppers and drives significantly higher basket sizes than a
• 4:17
  Speaker 1: traditional shelf based layer.
• 4:18
  Speaker 2: And Jasi boy Ikea has specialized in the inspirational retail
• 4:22
  Speaker 2: format four years.
• 4:23
  Speaker 1: Yeah, there's a reason Ikea rutzi through entire fake apartment
• 4:27
  Speaker 1: before you reached the checkout.
• 4:28
  Speaker 2: Yep, you realize how those curtains paired with that cash
• 4:31
  Speaker 2: and this rug works so well together.
• 4:33
  Speaker 1: And they mean, here's a thing. Fifty eight percent of
• 4:35
  Speaker 1: Australian furnished shoppers still prefer the tactile in store experience
• 4:39
  Speaker 1: over buying online, so kmart clearly wants a big slice
• 4:42
  Speaker 1: of that.
• 4:43
  Speaker 2: The challenge for it k Home is that Ikea has
• 4:45
  Speaker 2: had decades to perfect.
• 4:46
  Speaker 1: This sink, the meatballs, the maze, the Swedish products that
• 4:49
  Speaker 1: looks like someone fell asleep on a keyboard while riding them.
• 4:51
  Speaker 2: So Kmart's hoping that its own showroom can outperform the
• 4:54
  Speaker 2: Swedish maestros.
• 4:57
  Speaker 1: For our third and final story, Bending Spoon, it's the
• 5:00
  Speaker 1: Italian app studio that dies buying into net brands has
• 5:03
  Speaker 1: just filed for a twenty billion US dollar nasdak ipo.
• 5:06
  Speaker 2: Bending Spoons is a very specific hobby and I'm quite
• 5:09
  Speaker 2: here for it, So tell me more, okay.
• 5:10
  Speaker 1: So Benning Spoons is the Italian based tech company a
• 5:12
  Speaker 1: quite struggling but pretty iconic and well known internet platform.
• 5:16
  Speaker 2: Some business that you wouldn't even believe are still around.
• 5:19
  Speaker 1: Yeah, it acquires them at a Lulu price, strips them
• 5:21
  Speaker 1: back and turns them into profitable business.
• 5:23
  Speaker 2: That company is like Vimeo, the video hosting platform that
• 5:26
  Speaker 2: tried to compete with YouTube.
• 5:27
  Speaker 1: And we transfer the file sharing service that appears in
• 5:29
  Speaker 1: your life once every six months when someone sends you
• 5:31
  Speaker 1: a giant PDF.
• 5:32
  Speaker 2: Is also event bright, the event's marketplace. And ever note
• 5:35
  Speaker 2: the og note taking app. And they even own AOL. Yes,
• 5:39
  Speaker 2: AOL and it seems to be working.
• 5:41
  Speaker 1: Yeah. Revenue hit over one point three billion US dollars
• 5:43
  Speaker 1: in twenty twenty five, which is up ninety five percent
• 5:45
  Speaker 1: year on year, and now Bending Spoon is listing on
• 5:48
  Speaker 1: the NASDAK targeting a twenty billion US dollar valuation pitch.
• 5:51
  Speaker 2: Here, the buy and rebuild model is a lot more
• 5:54
  Speaker 2: profitable then you may think. So what is the key
• 5:57
  Speaker 2: learning here? You don't need to build the next big thing.
• 5:59
  Speaker 2: Sometimes you just need to buy the last big thing
• 6:02
  Speaker 2: and restructure the business man. We've heard a lot about
• 6:05
  Speaker 2: the buy verse build predicament for businesses. The Bending Spoon
• 6:08
  Speaker 2: actually specializes in the buy and rebuild model. They acquire
• 6:12
  Speaker 2: mature but often struggling digital brands, and they focus on
• 6:14
  Speaker 2: optimizing these businesses for cash flow from existing customers.
• 6:17
  Speaker 1: In fact, be man bending Spoon's marketing spend is just
• 6:20
  Speaker 1: six percent of total revenue.
• 6:22
  Speaker 2: They buy businesses where they can centralize the tech and
• 6:24
  Speaker 2: extract margin, and it seems to be working.
• 6:26
  Speaker 1: Their legacy assets hit ninety five percent net revenue retention,
• 6:30
  Speaker 1: which is their key metric for success.
• 6:32
  Speaker 2: The result revenue per employee hit a whopper two point
• 6:35
  Speaker 2: six mil, which is more than double what.
• 6:36
  Speaker 1: It was before, and now they're hoping they can scale
• 6:39
  Speaker 1: this business on the public markets too. If you've been
• 6:42
  Speaker 1: in the Flux app, you've listened to the pod, and
• 6:43
  Speaker 1: you're all across all the latest business and finance news,
• 6:46
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• 6:51
  Speaker 2: Thanks for listening and we'll see you on Monday.