The Surf Industry continues to consolidate

More news on the shrinking surf industry.

Online surfwear retailer SurfStitch Group has snapped up web surf forecaster Magicseaweed and online surf publisher Stab Magazine in a cash and scrip deal, while also raising $37.5 million from institutional investors to pay for the acquisitions and pursue other growth options.

SurfStitch will pay $13.8 million cash and 4.8 million shares in SurfStitch for the two online businesses, which combined attract over 2.75 million unique monthly visitors to their websites. The acquisitions are tipped to be earnings accretive from fiscal 2016, with nominal impact this financial year, the company said in a statement.

SurfStitch chief executive and co-founder Justin Cameron is hopeful that in addition to reducing the company's reliance on external marketing channels, the two acquisitions will deliver revenue synergies as content on both sites will drive sales to SurfStitch and promote repeat visitation across all platforms.

"SurfStitch's demonstrated global leadership in action sports and youth culture apparel is greatly enhanced with the addition of Magicseaweed and Stab Magazine," he said. "These highly complementary acquisitions represent the voice of SurfStitch's core audience, connecting us with our customers and providing us greater insight into their preferences, influences and purchasing behaviour."

A fully-underwritten institutional placement of 25 million shares - representing 11.7 per cent of issued capital and priced at $1.50 per share - will raise the needed $37.5 million cash to pay for Stab and Magicseaweed. This represents a 3.2 per cent discount to SurfStich last close of $1.55 per share.

SurfStitch also announced a share purchase plan, allowing participation benefits for all shareholders with the amount raised capped at $5 million.

​The company also reaffirmed its recently upgraded full year guidance of $199 million in revenue and $7 million in EBITDA. The group will beat its 2015 prospectus profit guidance by at least 37 per cent and is on track to exceed market forecasts in 2016 by cutting costs and removing duplication in its global e-commerce operations.

Surstitch shares remain in a trading halt.

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