APRN Stock Alert: The $50 Million Reason Blue Apron Is Up Today

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Shares of Blue Apron (NYSE:APRN) are spiking higher by over 60% after the direct-to-consumer (DTC) meal kit company announced that it had transferred its operational infrastructure to FreshRealm as part of a definitive agreement entered into today. The operational infrastructure includes fulfillment centers, equipment and related personnel.

As part of the agreement, Blue Apron received $25 million upfront and is eligible to receive another $25 million upon satisfying certain milestones. The two companies also entered into an initial 10-year production and fulfillment agreement that will cement FreshRealm as the exclusive supplier for Blue Apron’s meal kits.

FreshRealm will receive licenses to “certain rights regarding the ability to use the Blue Apron brand in certain retail channels and the right to use certain Blue Apron software.” Furthermore, the two companies have agreed to enter into subleases upon the closing of the transaction for FreshRealm’s facilities in Richmond, CA, and Linden, NJ.

APRN Stock: Blue Apron Sells Operational Infrastructure to FreshRealm

From the upfront $25 million, Blue Apron was able to complete a repayment of all of its outstanding senior secured notes, eliminating its debt in the process. This builds onto Blue Apron’s previously announced strategy to become an asset-light company, which involves a lower employee headcount and administrative expenses. In addition, the company’s plan to sell its operational infrastructure to FreshRealm was previously announced last month.

“We expect that this will allow us to focus all our efforts on providing even greater innovation and convenience to our customers as we remain at the forefront of culinary trends,” said CEO Linda Findley. “We are confident that we can continue to deliver the same product our customers know and love, while increasing efficiency and accelerating our path to profitability.”

Let’s rewind to the additional $25 million contingent upon certain milestones. FreshRealm will pay Blue Apron $3.5 million in notes, which is “subject to offset for certain indemnification obligations.” Next, Blue Apron is eligible for a $4 million cash payment contingent on operational and financial milestones.

Finally, Blue Apron could receive up to $17.5 million in rebates against payments based on the volume of meal kits sold and new product initiatives. The meal kit company has also issued to FreshRealm warrants to purchase APRN equivalent to 19.9% of outstanding common stock with an 18-month lockup period subject to certain exceptions.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. 

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

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