Amazon third get together Pharmapacks plans to go public through SPAC
An Amazon.com delivery driver carries boxes into a delivery truck outside a distribution facility in Hawthorne, Calif., February 2, 2021.
Patrick T. Fallon | AFP | Getty Images
The US top seller on the extensive Amazon marketplace is entering the SPAC boom.
Pharmapacks’ parent company Packable announced Thursday that it was merging with Highland Transcend Partners I Corp. The deal will value the combined company at $ 1.55 billion.
Pharmapacks started as a stationary pharmacy business in 2010 and has since grown to become the number 1 Amazon seller in the US based on the number of consumer reviews, according to market research company Marketplace Pulse. The company offers a range of health, personal care and beauty products on several online marketplaces.
The SPAC is the latest sign that Amazon’s booming third-party marketplace is attracting investors who see another way to make money on the shoulders of the largest e-commerce site. The marketplace offers products from millions of sellers and now accounts for more than half of Amazon’s total retail sales.
Over the past year, investors have poured money into aggregators like Thrasio and Perch buying promising products and storefronts with the aim of using their data and operational expertise to drive sales.
Thrasio is in talks to go public through a merger with a SPAC led by former Citigroup executive Michael Klein, which could be valued as high as $ 10 billion, Bloomberg reported in June.
Thrasio, an early leader in the big business of Amazon aggregators, had a booth at the popular Prosper Show for Amazon sellers in Las Vegas, Nevada on July 14, 2021.
In November, Pharmapacks raised over $ 250 million from private equity firm Carlyle Group, which the company valued at approximately $ 1.1 billion.
As part of the SPAC, Packable is raising $ 180 million from investors such as Fidelity and Lugard Road Capital. The proceeds will be used to help Packable expand internationally and in multiple online marketplaces, the company said in a statement.
A SPAC is a blank check company that raises money to buy a private company through a reverse merger and take it public with the help of funding additional investors. SPAC deals have become an increasingly popular way to go public over the past year.
Trying to expand beyond Amazon
In addition to Amazon, Pharmapacks also offers its products on Walmart, eBay, Kroger, Target, and Facebook, along with several direct-to-consumer sites.
Packable said in an investor presentation that sales this year increased 22% to 456 million. One benefit of going public through a SPAC rather than a traditional IPO is that companies can make forward-looking forecasts.
Nevertheless, Pharmapacks does not expect an operating profit until 2024. This is because, according to estimates, around half of its revenue for 2021 will be spent on sales and distribution and another 20% on storage and administration costs.
Like many e-commerce companies, Packable has benefited from the pandemic-induced surge in online shopping. But sales growth began to slow dramatically in the first half of this year, in part as a result of global supply chain constraints that “resulted in significant inventory levels, delays in orders, and delays in engaging new customers.” said in the file.
Packable listed ongoing supply chain issues from the Covid-19 pandemic as a potential risk to its business. It also warned that a significant portion of its revenue is tied up in a small number of marketplaces and that “a loss of access to or significant decline in activity” in those marketplaces could harm the company.
Packable said it “could be affected by fraudulent and illegal activity by other third party vendors and possibly marketplace programs designed to prevent such activity”. The Amazon marketplace has been plagued by persistent issues surrounding counterfeiting, unsafe products, and fake reviews for years.
– CNBC’s Ari Levy contributed to this report.
SEE: What’s behind the hype in the Amazon aggregator area?