LONDON (ShareCast) - UK wine merchant Majestic Wine on Friday announced it will buy Naked Wines, a customer funded international online wine business, for up to £70m.
The agreement includes approximately £50m payable on completion in cash, plus up to £20m contingent consideration payable in Majestic's ordinary shares. Cash consideration is being funded by new debt facilities. Majestic said that the deal is expected to be enhancing to fully earnings in 2017.

Naked Wines asks customers to part with £20 a month to fund the business which in return, sees the company give discounts of 25% to 50% off their wine purchases. It claims to have over 300,000 customers funding more than 130 winemakers. For 2014, Naked Wines had sales of £74m but with an operating loss of £3.3m.

Majestic also announced that Rowan Gormley, founder and chief executive of Naked Wines, has been appointed as boss of the enlarged Majestic/Naked tie-up. This comes after Majestic also updated the market with a trading statement.

In the update, the company said it expects to announce adjusted pre-tax profit of approximately £21m for the year ended 31 March, 2015. It added that final dividend for 2015 and the interim dividend for 2016 will be withheld, with future dividends to be progressively re-instated by 2018 for when after the merger is complete.

"The acquisition of Naked Wines represents a transformational deal. The two businesses have significant strengths which are very complementary. Majestic's distribution skills, a nationwide UK store network and customer service orientated knowledgeable staff, are a perfect fit with Naked Wines' unique sourcing and selling model," said Phil Wrigley, chairman of Majestic Wine.

"This acquisition will significantly accelerate the planned development of Majestic's online capabilities whilst providing Naked Wines with a nationwide store network to allow a Click & Collect delivery option for its customers. In addition, this acquisition opens up attractive international markets, increasing our potential customer reach eightfold," added Wrigley.

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