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Solo Brands acquires TerraFlame

An indoor open-flame marshmallow roaster.

TerraFlame's indoor open-flame marshmallow roaster. Photo: Courtesy of Solo Brands

Solo Brands has acquired TerraFlame, a seller of indoor fire products, its CEO John Merris tells Axios.

Why it matters: Grapevine, Texas-based Solo Brands — one of the few DTCs that's profitable and publicly traded — is adding a business that has relationships with retailers such as Target.

Details: Though Merris declined to comment on the deal's valuation, he pointed out that the company drew $15 million from its revolving line of credit.

  • In addition to the relationship with Target, the acquisition also fits nicely within its Solo Stove business.
  • The deal came about after TerraFlame reached out about making a product for the acquirer.
  • Merris says he saw benefits in adding the capability of making products with concrete and adding talent.

Of note: Merris previously told Axios that Solo Brands was looking to acquire in the coming months at least one brand immediately synergistic as valuation multiples decline.

  • Deal valuations for the kind of targets the company looks at have declined from a peak in early 2021 in the double digits to between 6x and 8x EBITDA now, he notes.

Catch up fast: Since the beginning of March, the DTC business' stock has increased from $4.06 per share to $5.94 as of Thursday morning's trading, giving it a market cap of about $380 million.

  • It recently reported earnings on May 4 that included a net sales increase of 7.3% to about $88 million and an increase in both net income and EBITDA.

The latest: The company announced today that some of its stockholders intend to sell about 11.3 million Class A shares of common stock.

  • Underwriters for the secondary offering will also be given the option of purchasing nearly 1.7 million additional shares.

What's next: Solo Brands continues to keep its eye out for more tuck-in acquisitions, the CEO says.

The big picture: "With higher interest rates, cash is harder to come by and it’s more expensive. And it creates a deal environment in which people’s valuations expectations are changing," Merris adds.

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