The days of subscription candy delivered to your door are no more with confectionery company Candy Club (ASX: CLB) set to merge with tech advisory business Scalare Partners which will list on the ASX via the Candy Club back door. 

Upon completion, Candy Club will formally change its name to Scalare Partners, with a combined entity expected to have a market cap of $26.5 million after undertaking a capital raise. 

Candy Club and Scalare believe combining the two entities via the ASX will allow Scalare to scale faster and provide more opportunities to cross-sell across the existing business and the wider technology ecosystem.

Non-executive Director of Candy Club, Gary Simonite, said, “It is exciting to announce this transaction today as it will give our shareholders exposure to the fast-growing global technology ecosystem.”

Scalare focuses on providing scale-up services, products and expert advice tailored to tech businesses. It is involved in the broader technology ecosystem, holding initiatives such as the Australian Technology Competition (ATC), Tech Ready Women (TRW) and a “Be the Change” programme.

With an emphasis on the Australian and USA technology sectors, Scalare’s portfolio spans multiple geographies, including Australia, the USA, New Zealand, Singapore, the UK, and Europe.

CEO of Scalare Partners, Carolyn Breeze, added, “The combination of Scalare and CLB is a true win-win for both sets of shareholders, employees and the companies we work with across the technology ecosystem. As a listed entity, we offer all investors the ability to invest in a wide range of early-stage technology companies that are usually only available through long term, illiquid and privately held venture capital investment funds.”

For the acquisition, Candy Club plans on raising between $4 and $8 million. The issue price of Candy Club shares under Capital Raising is expected to be approximately $0.25 per share on a post-consolidation basis.

Following completion, the indicative shareholdings in the combined entity are expected to be existing CLB shareholders holding approximately 2%, Scalare shareholders holding approximately 68% and investors in the Capital Raising holding approximately 30%.

Moreover, the Scalare Board will take over operations. On completion of the Capital Raise, Gary Simonite and Greg Starr will resign as directors of CLB. Scalare will fund the re-admission costs.

While life beyond the takeover seems all mapped out for Candy Club, it still has to surpass a major roadblock. On April 11, 2024, the ASX notified the Company that Candy Club might not satisfy listing requirements because Scalare’s business model is “vague” or “ill-defined” and that most of its historical revenues are from unrealised gains on investments. In contrast, its main undertaking is the provision of products, services and expert advice. 

Moreover, ASX noted that Scalare’s historical cash revenues are insufficient to demonstrate that its business operations have sufficient substance to support listing at this time.

Candy Club and Scalare, however, state that all these issues are addressable. 

If the acquisition is confirmed, Candy Club will no longer have debt, and Scalare will have successfully completed a back-door listing. 

On the flip side, if the Company and Scalare are unable to meet ASX’s requirements for the re-listing and if there’s no other suitable proposal, the Company has flagged being delisted from the Official List of ASX on or about October 15, 2024.