Online grocer Misfits Market Inc. said Wednesday it will acquire competitor Imperfect Foods Inc., bringing together a pair of companies that sell consumers sometimes-weird-looking food that might otherwise end up in landfills.
(Bloomberg) — Online grocer Misfits Market Inc. said Wednesday it will acquire competitor Imperfect Foods Inc., bringing together a pair of companies that sell consumers sometimes-weird-looking food that might otherwise end up in landfills.
Misfits declined to share financial details of the mostly stock deal. Chief Executive Officer Abhi Ramesh said Misfits expects the combined business to have a valuation that’s greater than the sum of the two closely held companies.
New York-based Misfits was valued at $2 billion a year ago, while San Francisco-based Imperfect Foods was valued at $700 million in January 2021. Ramesh will lead the combined company, and Imperfect Foods’s entire executive team will remain with the company.
Ramesh said the company might not need to to raise money again after the deal. An initial public offering “is the more likely path for us,” he said. The combined business is set to surpass $1 billion in sales and achieve profitability by early 2024, he said.
The companies are planning an integration period of about eight months after the deal’s closing, which is subject to regulatory approval. Solomon Partners advised Imperfect Foods, with DLA Piper serving as legal adviser, according to a statement. Misfits worked with Wilson Sonsini Goodrich & Rosati as its legal adviser.
In the short term after the acquisition’s completion, customers of both services will continue to visit the same websites they have always used, but they may notice additional products and categories. Misfits will also begin to use Imperfect’s delivery network, including its network of more than 450 delivery vans. By combining operations, Ramesh said, the companies expect prices to go down for customers.
No job cuts are planned at the moment and success doesn’t depend on reducing headcount, Ramesh said. But “a lot is still up in the air,” he said.
The companies’ products often would be bound for the trash for cosmetic reasons such as odd shapes and imperfections for fruit and vegetables, or are just surplus. Both startups benefited from the surge in online grocery shopping during the pandemic, a boom that has largely endured. And each raised significant funds in 2021, fueling expansion to reach more customers across the US.
One major difference between the two, however, is that while Misfits customers skew more suburban and rural, Imperfect’s are more urban and suburban. The customer overlap is “not huge,” Ramesh said. Together, the brands will reach about 500,000 subscribers each month.
(Updates with advisers in fifth paragraph)
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