Pharmapacks, a third-party vendor on Amazon, plans to go public through SPAC

The top U.S. retailer in Amazon’s vast market is entering the SPAC boom.

Packable, the parent company of Pharmapacks, said Thursday it plans to make it public through a merger with Highland Transcend Partners I Corp., a special-purpose acquisition company. The deal will value the combined company at $ 1.55 million.

Pharmapacks started as a pharmaceutical company in 2010 and has since become Amazon’s top seller in the United States, according to the number of consumer reviews, according to research firm Marketplace Pulse. The company offers a range of health, personal care and beauty products in various online markets.

The SPAC is the latest sign that Amazon’s expanding third-party market is attracting investors, who see another opportunity to make money on the shoulders of the largest e-commerce site. The market offers products from millions of sellers and now accounts for more than half of Amazon’s overall retail sales.

Over the past year, investors have invested money in aggregators like Thrasio and Perch, which are acquiring promising products and showcases with the goal of using their data and operating experience to turbo-feed sales.

Thrasio is in talks to make public a merger with a SPAC led by former Citigroup executive Michael Klein at a valuation that could reach $ 10 billion, Bloomberg reported in June.

In November, Pharmapacks raised more than $ 250 million from private equity firm Carlyle Group in a deal that valued the company at about $ 1.1 billion.

As part of the SPAC, Packable raises $ 180 million from investors, including Fidelity and Lugard Road Capital. The proceeds will be used to help Packable expand internationally and into various online markets, the company said in a statement.

An SPAC is a blank check company that raises money to buy a private entity through a reverse merger and make it public with the help of additional investor financing. SPAC offerings have become an increasingly popular route to go public over the last year.

In addition to Amazon, Pharmapacks said it also offers its products on Walmart, eBay, Kroger, Target and Facebook, along with several direct consumer sites.

Packable said in a presentation to the investor that this year’s revenue will increase 22% to $ 456 million and that it expects average annual growth of 38% by 2024, when sales should exceed $ 1.3 billion of dollars. One of the advantages of making it public through a SPAC rather than a traditional IPO is that companies can issue future projections.

However, Pharmapacks does not expect to generate operating profits until 2024. This is because it spends about half of its sales and distribution revenue and another 20% on storage and administrative costs, according to 2021 estimates.

Like many e-commerce companies, Packable gained an advantage from the increase in online shopping that generated a pandemic. But its revenue growth began to slow sharply during the first half of this year, in part as a result of global supply chain constraints, which “led to a significant inventory of stocks, delays in purchase orders and delays in incorporating new customers, ”the company said in the presentation.

The continuing supply chain problems listed are due to the Covid-19 pandemic as a potential risk to your business. He also warned that a significant portion of its revenue is related in a small number of markets and that “loss of access or a significant decrease in activity levels” in those markets could harm the company.

Packable said it could be “affected by fraudulent and illegal activities of other third-party vendors and possibly by market programs designed to prevent such activities.” The Amazon marketplace has been affected for years by persistent problems related to counterfeits, unsafe products and fake reviews.

– CNBC’s Ari Levy contributed to this report.

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