According to a new production and fulfillment agreement, FreshRealm will be the exclusive supplier of Blue Apron’s meal kits.
Under definitive agreements entered into on June 9, meal kit company Blue Apron has transferred its operational infrastructure to fresh meals provider FreshRealm, including fulfillment centers, equipment, know-how and related personnel. Blue Apron received about $25 million of upfront cash, subject to certain adjustments, and is eligible to receive up to $25 million of value upon the achievement of certain milestones.
Blue Apron and FreshRealm also entered into a production and fulfillment agreement with an initial term of 10 years, under which San Clemente, Calif.-based FreshRealm will be the exclusive supplier of Blue Apron’s meal kits. In addition, Blue Apron and FreshRealm entered into license agreements under which Blue Apron licensed to FreshRealm certain rights regarding the ability to use the Blue Apron brand in certain retail channels and the right to use certain Blue Apron software. In connection with the closing of the transactions, Blue Apron entered into subleases with FreshRealm for its Richmond, Calif., and Linden, N.J., facilities.
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Blue Apron issued to FreshRealm a warrant to purchase shares of Blue Apron common stock representing 19.9% of the company’s outstanding common stock, with an exercise price of 1 cent per share. Blue Apron agreed to grant to FreshRealm certain registration rights with respect to the warrant shares, and FreshRealm agreed to an 18-month lockup, subject to certain exceptions.
These agreements have made New York-based Blue Apron an asset-light company focused on the growth of its direct-to-consumer business. Additionally, Blue Apron expects to ramp up the expansion of its product offerings, among them new convenient options; continue streamlining its business in terms of headcount and administrative costs; and drive further cash savings. The company believes that these changes will enable it to achieve profitability more quickly. Blue Apron plans to provide an update on its profitability goals and future plans in its upcoming second-quarter 2023 earnings call.
With a portion of the proceeds of the transaction, Blue Apron also completed the repayment of all of its outstanding senior secured notes, eliminating its debt.
The transactions were approved by the boards of directors of both companies.