| Tue 19 Aug 2008, 16:52 | | BIO - Bioscience Brands - Pro Forma Financial Effects In Respect Of Various |
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BIO
BIO
BIO - Bioscience Brands - Pro Forma Financial Effects In Respect Of Various
Transactions Undertaken By The Company, Withdrawal Of Cautionary
Announcement And Notice Of General Meeting
BIOSCIENCE BRANDS LIMITED
(Formerly Wellco Health Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2005/005805/06)
("BioScience Brands" or "the Company")
ISIN Code: ZAE000115036 Share code: BIO
PRO FORMA FINANCIAL EFFECTS IN RESPECT OF VARIOUS TRANSACTIONS UNDERTAKEN BY
THE COMPANY, WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT AND NOTICE OF GENERAL
MEETING
1. Introduction
1.1 Shareholders were advised on SENS on 25 October 2007 that the Company
had entered into a restructuring agreement ("the Restructuring Agreement")
with Arcay Merchant (Proprietary) Limited ("Arcay") dated 24 October 2007,
which agreement was effective immediately. The restructuring agreement
provided, inter alia, for the appointment of a new management team, the
appointment and resignation of directors, an agreed valuation of the Company
on which the transaction contemplated in the agreement was based, the
recapitalisation of the Company, the disposal of Nutrimax for R3.8 million
and the cancellation of licence agreement entered into with Oxyboost
(Proprietary) Limited ("the Herbology Licence Agreement")
1.2 On 14 December 2007, shareholders were advised that:
1.2.1 Arcay Merchant had entered into an agreement to acquire Bioharmony
(Proprietary) Limited ("Bioharmony") and Aldabri 53 (Proprietary) Limited
t/a Muscle Science ("Muscle Science") (together "the Acquisitions") from
Enaleni Pharmaceuticals Limited ("Enaleni") on behalf of Bioscience Brands.
The agreement between Arcay Merchant and Enaleni was concluded with the
intention of it being a warehousing arrangement as Wellco Health Limited,
now BioScience Brands was, at the time, technically insolvent, and, Enaleni
required that all suspensive conditions to the agreements providing for the
Acquisitions be fulfilled by 01 December 2007. Shareholders were further
advised that following the successful conclusion of negotiations with
creditors, these assets would be injected into the Company for a combined
purchase consideration of R43 500 000 ("the Combined Purchase
Consideration");
1.2.2 shareholders will be requested to approve the sale and assignment
of the trade marks, copyrights and domain names pertaining to the Nutrimax
brand to Oxyboost for R3.8 million; and
1.2.3 the Herbology Licence Agreement will be cancelled for a fee of R1
million to be settled through the issue of 71 428 571 new shares in
BioScience Brands and the granting of an American option to Oxyboost and/or
its associates to subscribe for such number of additional shares in
BioScience Brands at 5.25 cents per share, as will enable Oxyboost and/or
its associates to acquire up to a 24% interest in the Company on or before
30 June 2009 ("the Oxyboost Option").
1.3 During December 2007, Arcay Merchant sold Bioharmony and Muscle Science
to Fluxrab Investments 163 (Proprietary) Limited ("Fluxrab"), a company
incorporated in order to fund the restructuring of BioScience Brands, but in
which Arcay Merchant maintains an indirect interest through a 50%
shareholding in Fluxrab being held by one of the Arcay Merchant directors.
1.4 The directors of BioScience Brands are pleased to advise shareholders
that following the conclusion of the Restructuring Agreement and the
successful negotiations with creditors, the Company has:
1.4.1 acquired Bioharmony from Fluxrab for a purchase consideration of
R28 924 574 which was settled by the payment of R26 597 310 in cash and the
issue of 166 233 188 Bioscience Brands ordinary shares at 1.4 cents per
share to Fluxrab;
1.4.2 acquired Muscle Science from Fluxrab for a purchase consideration
of R14 575 425 which was settled by a cash payment of R13 402 690 and the
balance by the issue of 83 766 813 Bioscience Brands ordinary shares at 1.4
cents per share to Fluxrab;
1.4.3 that the Company has raised an amount of R41 108 284 through a
specific issue of 1 174 522 399 shares at an issue price of 3.5 cents per
share to selected corporations and individuals, which monies were used to
settle creditors and to pay an initial portion of the purchase price in
respect of the Acquisitions. The outstanding amount of the purchase price
was settled following the conclusion of a loan agreement between the Company
and Fluxrab in the amount of R11 909 000, which monies will be repaid
following the proposed rights offer referred to in paragraph 6 below. The
pro forma financial effects of the specific issue of shares for cash are
incorporated in the financial effects set out in paragraph 7 below;
1.4.4 that the Company has concluded an empowerment transaction ("the
BEE transaction") with Thebe Medicare (Proprietary) Limited ("Thebe
Medicare") in terms of which Thebe Medicare has been granted an American
option to subscribe for up to a maximum number of 571 428 571 ordinary
shares in Bioscience Brands at 3.5 cents per share on or before
31 August 2009 ("the Thebe Option");
1.4.5 that in terms of the BEE transaction, Thebe Medicare has been
granted a second American option, which option is subject to the exercise by
Oxyboost of the Oxyboost Option and provides Thebe Medicare with the right
to subscribe for such number of additional shares in BioScience Brands at
3.85 cents per share as will enable Thebe Medicare to achieve a 40% interest
in the Company should Oxyboost exercise the Oxyboost Option, which option is
exercisable on or before 30 September 2009 ("the Thebe Extended Option").
1.5 The Restructuring Agreement, the specific issue of shares for cash, the
Acquisitions, the BEE transaction, the specific issue of shares to directors
and key executive management, detailed in paragraph 4 below and the granting
of options to directors detailed in paragraph 5 below are collectively
referred to as "the Transaction".
2. Rationale
BioScience Brands previously lacked the critical mass to weather the
turbulent environment of a consumer brands business and, together with some
premature strategic decisions resulted in the business performing very
poorly and being suspended on the JSE in July 2007 for failing to publish
its financial results.
The Transaction provides BioScience Brands with a strong new management team
with extensive brand management experience, capable of rebuilding the
Company and rapidly expanding its operations.
The Fast Moving Consumer Goods industry, which forms the basis of BioScience
Brands business, is highly competitive and one that relies on excellent
operational delivery. It is an industry that requires sufficient critical
mass across a portfolio of strong brands. Muscle Science and Bioharmony are
both strong, well established brands that are growing ahead of the markets
in which they operate and will bring this critical mass to BioScience
Brands, whilst the Board is confident that KGB and Herbology brands can be
effectively rebuilt and extended. The implementation of the Transaction will
enable the Company to rebuild its existing brands, build on the growth
prospects of Bioharmony and Muscle Science and acquire significant other
complimentary brands.
3. Implementation of the specific issue of shares for cash and the
Acquisitions
In order to enable the Company to proceed with the Acquisitions and prevent
the potential termination of the Acquisition Agreements through non-payment
of the Combined Purchase Consideration, the JSE Limited ("the JSE") granted
dispensation to the Company, allowing it to proceed with the specific issue
of shares for cash at an issue price of 3.5 cents per share and the
implementation of the Acquisitions referred to in paragraphs 1.3.1 and
1.3.3 above respectively, on the basis that irrevocable undertakings to
vote in favour of the Transaction had been received from 75.51% of
shareholders entitled to vote at the general meeting convened for the
purpose of approving the requisite resolutions required to implement the
Transaction. The dispensation is, however, subject to the ratification of
the specific issue of shares for cash and the Acquisitions by shareholders
at a meeting convened for the purpose of ratifying and/or approving the
requisite resolutions required to implement the Transaction ("the General
Meeting").
A fairness opinion on the specific issue of shares for cash to selected
corporations and individuals, including directors, is set out in the
circular to shareholders referred to in paragraph 10 below.
4. Specific issue of shares to directors and key executive management
The board recognises the skills and extensive experience that the directors
and key members of the executive management team bring to the Company and
the importance of securing a strong executive team that is capable of
rebuilding the Company and rapidly expanding its operations. The board has
accordingly resolved to incentivise the directors and key members of the
executive management team through the allotment and issue of 176 448 295
shares in the Company as part of the Transaction.
The shares will be issued at zero cost to the directors and members of the
executive management team as per Column A in the table below, subject to the
condition that, save for Carol Ansara who resigned as a director with effect
from 13 May 2008, but who was intimately involved in the restructuring of
the Company, should any of the above executives leave the employ of the
Company at any time prior to 31 December 2010, then they shall be obliged to
transfer an amount equating to 2.78% of the shares listed in Column B for
each month or portion of a month not completed, for zero cost, to the person
who is appointed to the position vacated by such executive. In the event
that the position is not fulfilled with immediate effect, then such shares
will be transferred for zero cost to the chief executive officer of the
Company who will be responsible for allocating them to the new appointee
once same is made. All shares issued in terms of the Executive Options will
be ordinary shares and will rank pari passu with the existing shares in
issue.
Executive Column A Column B
Michael Allan 106 052 480 70 762 821
Mark Strydom 20 106 157 20 106 157
Peter Ireland 10 000 000 10 000 000
Gary Seymour 2 500 000 2 500 000
Alan Zietvogel 2 500 000 2 500 000
Carol Ansara* 35 289 659 0
Total 176 448 296 105 868 978
A fairness opinion on the specific issue of shares to directors is set out
in the circular to shareholders referred to in paragraph 10 below.
5. Granting of options to directors
As an additional incentive to the executive directors and key members of the
executive management team, the board has resolved to grant the executive
directors and key members of the executive management team options to
subscribe for shares at a subscription price of zero cents per share ("the
Executive Options"). Should any shares be issued by the Company on before
31 August 2009 for any share-based transaction, including, but not limited
to the proposed rights offer detailed in paragraph 6 below, the exercise of
the Oxyboost Option and the exercise of the Thebe Option and the Thebe
Extended Option, the executive directors and key members of the executive
management will, at the same time, be entitled to subscribe for 11.12% of
the number of shares so issued up to a maximum of 299 098 338 shares on a
pro rata basis to their full allocation as detailed in the table set out
below, save for Carol Ansara whose Executive Option may only be exercised
in relation to the proposed rights offer. All shares issued in terms of the
Executive Options will be ordinary shares and will rank pari passu with the
existing shares in issue.
The Executive Options are further conditional in that, save for Carol
Ansara, should such executive leave the employ of the Company at any time
prior to 31 December 2010, then such executive shall be obliged to transfer
4.17% of the shares listed in column A for each month or portion of a month
not completed, for zero cost, to the person who is appointed to the position
vacated by such executive. In the event that the position is not fulfilled
with immediate effect, then such shares will be transferred for zero cost to
the chief executive officer of the Company who will be responsible for
allocating them to the new appointee once same is made.
Executive Column A
Michael Allan 168 596 694
Mark Strydom 96 499 202
Peter Ireland 25 817 226
Carol Ansara 8 185 217
Total 299 098 338
Of the 168 596 694 options to be issued to Michael Allan, 50 547 619
options, being 16.9% thereof, will be held by him in a fiduciary capacity
only and is to be used in order to incentivise future members of the
management team of BioScience Brands. These options will not accrue to him
nor be deemed to be for his benefit without the prior approval of the
Company.
A fairness opinion on the granting of the Executive Options is set out in
the circular to shareholders referred to in paragraph 10 below.
6. Proposed rights offer
In addition to the above Transaction, the Company proposes to raise an
amount of approximately R17 821 648 by way of a proposed rights offer, which
will commence after the lifting of the suspension of trade in BioScience
shares on the JSE, which monies will be used to repay the Fluxrab Loan as
well as to provide additional working capital for the business operations of
BioScience Brands. Salient dates in respect of the proposed rights offer
will be announced on SENS following the lifting of the suspension in trade
of the Company`s securities on the JSE.
7. Financial Effects
The unaudited pro forma financial effects set out below have been prepared
to show the combined impact of the Transaction on the EPS, HEPS, NAV and
TNAV per share both before and after the Thebe Option, the Oxyboost Option
and the Thebe Extended Option. The second column shows the pro forma
position as at the date of ratification and approval by shareholders of the
resolutions necessary to implement the Transaction. These pro forma
financial effects have been prepared by the directors, are presented for
illustrative purposes only and may not fairly present the Company`s
financial position, cash flow or the results of its operations.
BioScience Pro forma Pro forma after the
Brands after the Transaction and
Reviewed Transaction, exercise of the
Results for excluding the Thebe option, the
the 12 months exercise of Oxyboost option and
ended 29 the Thebe and the Thebe Extended
February 2008 Oxyboost Option
options
Loss per (6.62) (1.34) (0.88)
share
(cents)
Headline (5.27) (1.05) (0.74)
loss per
share
(cents)
Weighted 92 083 686 1 764 482 953 3,809,206,488
average
shares in
issue
Net asset (1.58) 2.59 3.25
value per
share
(cents)
Net (10.72) 0.23 2.16
tangible
asset value
per share
(cents)
Shares in 92 083 686 1 764 482 953 3 809 206 488
issue at
period end
Detailed unaudited pro forma balance sheets and income statements showing
the effect of the individual components of the Transaction as well as the
effect of the combined impact of the Transaction are set out in the circular
to shareholders referred to in paragraph 10 below.
8. Conditions Precedent
The Transaction remains subject to conditions precedent usually associated
with a transaction of this nature including the requisite majority of
BioScience Brands shareholders at the General Meeting, ratifying and/or
approving at the General Meeting, the requisite resolutions required to
implement the Transaction.
9. Lifting of the suspension in trade of the Company`s securities on the
JSE
Shareholders are advised that the continued listing of the Company is at the
discretion of the JSE and contingent upon the JSE`s assessment of the
suitability for listing of the Company after the Transaction and the release
of the Company`s audited results for the 16-months ended 30 June 2008.
10. Documentation
A circular setting out the full details of the Transaction and including the
fairness reports referred to above as well as fairness reports on the
disposal of the Nutrimax brand, the specific issue of shares to Oxyboost,
the granting of the Oxyboost Option, and the granting of options to Thebe
Medicare in respect of the BEE Transaction, which entities are all related
parties to the Company, was posted to shareholders on 16 August 2008.
11. Withdrawal of Cautionary Announcement
Following the publication of this announcement, the cautionary announcement
has been withdrawn and shareholders need no longer exercise caution when
dealing in the company`s securities.
12. Notice of General Meeting
Shareholders are advised that the general meeting to approve the Transaction
will be held at 14h00 on Monday, 01 September 2008 at Arcay House, Number 3
Anerley Road, Parktown, Johannesburg for the purpose of approving the
resolutions required to implement the Transaction as set out in the notice
of general meeting attached to and forming part of the circular to
shareholders referred to in paragraph 10 above.
Johannesburg
19 August 2008
Corporate Advisor to Arcay Lead Designated Advisor
Arcay Merchant (Proprietary) PSG Capital (Proprietary) Limited
Limited
Joint Designated Advisor
Arcay Moela Sponsors (Proprietary)
Limited
Date: 19/08/2008 16:52:01 Produced by the JSE SENS Department.
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