Solo Stove’s parent company, Solo Brands, went on a buying spree of direct-to-consumer companies while their business was growing. Some were meant to expand their fire pit business into adjacent categories.

One example was IcyBreeze, the outdoor air conditioner brand that they ultimately got rid of, but used the intellectual property to develop a better Solo Stove brand cooler and air conditioner. Another example was TerraFlame, which sold smokeless fire products for indoors and outdoor lifestyle products.

They acquired TerraFlame for $13.2 million in May of 2023 under the Solo Stove brand, rather than under Solo Brands. The idea was to bring Solo Stove indoors through branding, and sell more of both brands through cross-selling.

Solo Stove is a much different company now than it was of May 2023. They’re on their third CEO, and have been facing financial difficulties.

We’ll probably get more details on the “why” in Solo Brands’ next earnings call, but Solo Brands has sold TerraFlame back to the owners that they bought it from. It’s not a traditional divestiture though where the two businesses no longer have any affiliation.

Solo Brands must still see value in TerraFlame, because they sold the equity interest in the company back but they retained the intellectual property of TerraFlame. Plus, Solo Brands and the original owners entered into a supply agreement where they’ll produce TerraFlame products for Solo Brands and Solo Brands will have exclusive distribution rights.

That means that Solo Brands will still see revenue for selling TerraFlame and exclusively sell it, but it’s almost like a white labeling relationship. This will likely be completely transparent to the customer.

Deal Terms

There were a few key financial deal terms with the divestiture to the original owners. From the original acquisition in 2023, there must have been an earnout or some other bonus structure for milestones back to the owners because that’s been settled and no longer considered in Solo Brands’ financials as part of the deal.

Solo Brands has terminated consulting and employment agreements with the original owners. That makes sense because Solo Brands is no longer operating TerraFlame.

Finally, Solo Brands received a cash payment of $2.5 million. That’s considerably less than they paid, but they’re still receiving financial benefit from TerraFlame under the Supply Agreement and Solo Brands is cash strapped. It’s also gives Solo Brands the opportunity to focus on their core competencies that made them successful in the first place.