- The sale of the Verona Facility allows Flow to focus on the profitable growth of the Flow brand, simplifying its operating structure and improving its balance sheet
- BioSteel’s purchase of the Verona production facility enables vertical integration in support of BioSteel’s rapid growth strategy
- BioSteel and Flow enter into a co-manufacturing agreement to support an efficient transition while maximizing facility utilization
- Flow maintains ownership of the 144-acre Verona, VA spring water source
Flow Beverage Corp. today announced that it has reached a definitive agreement with an affiliate of BioSteel Sports Nutrition Inc. (“BioSteel”) whereby BioSteel has purchased all the assets of the Company’s production facility located in Verona, VA (the “Verona Facility”) for a purchase price of US $19.5 million, comprised of US $13.2 million in cash and US $6.3 million for the repayment of debt and the retirement of lease obligations (the “Transaction”).
To support Verona Facility utilization and an efficient transition for both parties, Flow and BioSteel have also entered into a co-manufacturing agreement (the “CMA”) whereby BioSteel will produce Flow’s portfolio of branded water at the Verona Facility, in addition to the production of BioSteel-branded sports hydration drinks on site. All active employees at the Verona Facility will become employees of BioSteel following a post-closing transition period.
Nicholas Reichenbach, Founder and Chief Executive Officer of Flow, stated: “The sale of the Verona production facility is a major milestone towards achieving profitable growth of the Flow brand. Through a significant reduction in our operating expenses associated with operating Verona and a material reduction in related future lease obligations, we have meaningfully improved our financial position and streamlined our organization. By maintaining ownership of our Virginia artesian spring and securing a co-manufacturing agreement with BioSteel, we expect continuity in our supply chain as we invest in continued revenue growth in the U.S.”
Bruce Jacobson, President of BioSteel, stated: “BioSteel is growing at a record pace, with thousands of new points of distribution added since the beginning of the year, and this acquisition allows us to unlock greater efficiency in our business as we achieve full vertical integration of our U.S. operations. As we move toward the top of the sports drink category, this agreement also supports our ability to consistently supply our premium ready-to-drink sports drinks, packaged in environmentally friendly Tetra Paks, which is a competitive advantage and support our consumers with the Clean. Healthy. Hydration. that the next generation of athletes demands.”
Strategic Rationale for Flow:
- Accelerating profitability for the Flow brand – the Transaction allows Flow to focus its investments on sales and marketing, accelerating the path towards profitable growth of the Flow brand.
- Improved operating cash flow – the Transaction simplifies Flow’s operating model in the U.S., providing consistent cost of goods sold and improving its balance sheet.
- CMA provides continuity in operations – the long-term CMA helps ensure continuity in the production of Flow’s portfolio of branded water at the production facility.
- Flow retains spring water source – Flow maintains its ownership of the 144-acre Virginia spring, securing local supply of naturally alkaline water from an artesian spring and allowing the Company to maintain its world class ESG practices.
Strategic Rationale for BioSteel:
- Supports rapid growth strategy and expansion of U.S. footprint – as BioSteel continues to grow its distribution in the U.S. at a record pace, this acquisition is a natural next step and provides a unique opportunity to take more control of its own supply chain while creating additional business value.
- Vertical integration – by taking full control of BioSteel ready-to-drink production in the U.S., the brand is taking its next critical step on its path to the top of the sports hydration category. Additionally, the CMA with Flow also facilitates effective facility utilization.
- Commitment to sustainable packaging as a competitive differentiator – BioSteel will ensure security of supply of its ready-to-drink sports drinks that are packaged in eco-friendly Tetra Paks, which are recyclable and feature a plant-based cap, a key differentiator in the sports drink category and a critical element of BioSteel’s better for you (and the planet) value proposition.