Halo Foods - Case Update

Kate Conneely and Michael Korda of KordaMentha, the joint administrators of Halo Foods, have provided a report to creditors outlining how a disappointing acquisition led the Sydney-based health food company to enter administration in late August 2023 despite having achieved record-high revenues in its latest fiscal year.

In spring 2022, the company acquired The Health Mummy, which was EBITDA positive at the time of the purchase, to achieve synergies and complement its existing products and services. However, shortly after the acquisition, THM’S revenue and earnings deteriorated as COVID-19 lockdowns came to an end and diverted spending from its online channel.

In May, the company engaged Modus Partners to conduct a strategic review and entered into a standstill agreement with Arrowpoint Capital, which had provided funding for the purchase of THM and was also providing invoice financing to assist with working capital. The sale process resulted in an agreement for the sale of the company’s shares in Keytone to existing Keytone management.

In late August, Arrowpoint Capital indicated it was no longer supportive of the sale process and would not provide additional financing, and the company’s directors appointed the joint administrators on 24 August. David Hardy, Ryan Eagle and Emily Seeckts of KPMG were appointed as receivers and managers of the company on the following day, and immediately commenced a sale process for the remaining assets.

This concluded with four separate asset sales, resulting in the transfer of approximately 25 employees and total savings of approximately $500,000 in employee entitlements. The total proceeds realised from the asset sales and the Keytone transaction were approximately $12 million. Arrowpoint Capital is expected to be paid in full, but it does not appear that there will be sufficient funds in Halo Foods to meet employee entitlements.

The joint administrators’ report can be found HERE.