| Thu 25 Oct 2007, 16:28 | | WLL - Wellco - Detailed cautionary in respect of t |
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WLL
WLL
WLL - Wellco - Detailed cautionary in respect of the restructuring of the
company
WELLCO HEALTH LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2005/005805/06)
("Wellco" or "the company")
ISIN Code: ZAE000071841 Share code: WLL
DETAILED CAUTIONARY ANNOUNCEMENT IN RESPECT OF THE RESTRUCTURING OF THE COMPANY
1 Introduction
Shareholders are advised that the board of directors of Wellco has entered into
a restructuring agreement with Arcay Merchant (Proprietary) Limited ("Arcay")
dated 24 October 2007, which agreement is effective immediately. The
restructuring agreement provides, inter alia, for the appointment of a new
management team, the appointment and resignation of directors, an agreed
valuation of the company on which all transactions contemplated in the agreement
will be based, the recapitalisation of the company, the reversal of the recent
licence agreement entered into by the outgoing board of directors and the agreed
disposal by the company of the Nutrimax brand (together referred to as the
"Transaction").
2 Appointment of a New Management Team and Restructuring of the Board of
Directors
Michael Allan will be appointed as the Chief Executive Officer, Carol Ansara and
Linda Cameron will be appointed as executive directors with immediate effect,
whilst Norman Preston and Tony McKeever have resigned from the board with
immediate effect. Dean Marais will continue to act as a director until 31
December 2007 in order to facilitate a smooth handover to the incoming board.
The curricula vitaes of the newly appointed directors are set out below:
Michael Allan
Qualifications: BCom, ACMA
Past Employment: Mike joined a multi-national brand company in 1987 as an
accountant and was promoted to Financial Director following a career in South
Africa and Europe. Prior to joining the Arcay Consortium, Mike successfully
formed a new franchise division under a leading brand to enhance and expand the
product range.
Mike`s particular interest lies in building and managing the infrastructures
that support a portfolio of brands.
Carol Ansara
Qualifications: B. Com, BCom Hons (Econ)
Past Employment: Carol joined a multi-national brand company in 1989 and worked
in various brand and marketing management positions culminating in a marketing
director of a number of leading brands. Carol`s last brief as Director was to
develop a franchise business plan and nationally launch a new division under a
leading brand.
Carol`s key strength lies in managing a portfolio of brands whilst exploiting
their full potential.
Linda Cameron
Qualifications: B. Com, B. Com (Hons), CA (SA)
Past Employment: Linda completed her articles at Grant Thornton and was
thereafter seconded to Grant Thornton`s London office for a 5-month period.
Linda joined Imagine Wealth in September 2004 and is responsible for a variety
of financial management functions in both the listed and unlisted arena for
Imagine Wealth`s clients.
3 Rationale
Whilst the Transaction has been entered into as a rescue operation, it provides
Wellco with a strong new management team with extensive brand management
experience, capable of rebuilding the company and rapidly expanding its
operations. The Restructured Board believes that provided that suitable
settlement arrangements can quickly be reached with the company`s existing
creditors, it will be in a position to rebuild the company`s brands and acquire
significant other complimentary brands.
4 Valuation
The parties have agreed that for purposes of the Transaction, a value of 3.5
cents per share has been placed on the company`s shares.
5 Recapitalisation of the Company
As advised by the outgoing board in the commentary to the audited consolidated
results for the year ended 28 February 2007 ("the Results Announcement"), the
company requires an injection of capital in order to cover working capital
requirements, negotiate and settle with creditors and fund the cash flow
requirements to restructure and grow the company. The new board of directors
proposes to raise the requisite capital by means of a share placement with
strategic partners and a rights offer to existing shareholders. Details of the
proposed recapitalisation plan will be announced on SENS in due course.
6 Future Strategy
The new management will focus on the organic growth of Wellco`s existing brand
portfolio, brand extension opportunities and strategic acquisition
opportunities.
7 Reversal of Licence Agreement
The licence agreement entered into with a major distributor on a set royalty
fee, as disclosed in the Results Announcement will be cancelled and the company
will regain full control over the Herbology brand.
8 Disposal of Nutrimax Brand
The newly appointed board will request shareholders to approve the sale of the
Nutrimax brand for a purchase consideration of R3.8 million, as disclosed in the
Results Announcement.
9 Rescue Operation
The Restructured Board will make application to the JSE Limited ("the JSE") to
have the Transaction declared as a rescue operation for purposes of expediting
the Recapitalisation of the Company and the disposal of the Nutrimax brand. The
results of this application will be released on SENS in due course.
10 Financial Effects
The financial effects of the Transaction will be announced following
negotiations with creditors and the finalisation of the proposals relating to
the recapitalisation of the company.
11 Conditions Precedent
The Transaction remains subject to conditions precedent usually associated with
a transaction of this nature including the approval of the requisite regulatory
authorities, including the JSE and the Securities Regulation Panel ("SRP") and
the approval of the requisite majority of Wellco shareholders at a meeting
convened for the purpose of approving the requisite resolutions relating to,
inter alia, the Recapitalisation of the Company and the Disposal of the Nutrimax
Brand.
12 Appointment of new Designated Advisor
Arcay Moela Sponsors (Pty) Ltd has been appointed as the Designated Advisor to
the company with immediate effect.
13 Appointment of new Company Secretary
Arcay Client Support (Pty) has been appointed as Company Secretary with
immediate effect.
14 Cautionary Announcement
Shareholders are advised that the full impact and the related financial effects
of the proposed restructuring remains to be determined, but is expected to have
a material effect on the price of the company`s securities. Shareholders are
accordingly advised to exercise caution when dealing in the company`s securities
until a full announcement is made.
Johannesburg
25 October 2007
Corporate Advisor to Arcay Designated Advisor
Arcay Corporate Finance (Pty) Ltd Arcay Moela Sponsors (Pty) Ltd
Date: 25/10/2007 16:28:30 Produced by the JSE SENS Department.
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