| Thu 16 Oct 2008, 17:10 | | BIO - Bioscience Brands - Abridged Revised Listing Statement, Lifting Of |
|
BIO
BIO
BIO - Bioscience Brands - Abridged Revised Listing Statement, Lifting Of
Suspension Of Trade In The Company`s Securities And Proposed Rights Offer
Announcement
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
ABRIDGED REVISED LISTING STATEMENT, LIFTING OF SUSPENSION OF TRADE IN THE
COMPANY`S SECURITIES AND PROPOSED RIGHTS OFFER ANNOUNCEMENT
These abridged revised listing particulars relate to the lifting of
suspension in the trade of BioScience Brands` shares on the Alternative
Exchange of the JSE ("AltX") with effect from Friday, 17 October 2008. These
abridged revised listing particulars are not an invitation to the public to
subscribe for shares in the company, but are issued in compliance with the
JSE Limited`s ("the JSE") Listings Requirements and contain salient
information in respect of the company, which is more fully described in the
company`s revised listing particulars, included in the circular to
shareholders dated 13 August 2008 ("the circular").
1. Introduction
At a general meeting of the company held on 1 September 2008 ("the
general meeting"), shareholders approved all the resolutions presented
in connection with, inter alia, the restructuring of the company, a
specific issue of shares for cash to selected corporations and
individuals, the conclusion of an empowerment transaction with Thebe
Medicare (Proprietary) Limited ("Thebe") and the acquisitions of
Bioharmony (Proprietary) Limited ("Bioharmony") and Aldabri 53
(Proprietary) Limited t/a Muscle Science ("Muscle Science" or
"Aldabri"), collectively "the restructuring transaction".
The JSE has formally approved the listing of 1 672 439 266 ordinary
shares with a nominal value of 0.01 cents per share in the share capital
of BioScience Brands with effect from 17 October 2008.
2. Incorporation, History and Nature of Business
BioScience Brands was incorporated in South Africa on 22 February 2005
as Nungu Trading 279 (Proprietary) Limited. On 21 April 2005, the
Company was converted to a public company and changed its name to Wellco
Health Limited, listing on the AltX on 22 September 2005. On 14 March
2008, the company changed its name to Bioscience Brands Limited.
BioScience Brands` primary business is the development and marketing of
consumer brands within the complimentary medicines and Fast Moving
Consumer Goods ("FMCG") categories. The FMCG industry 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. The Board of directors is confident that KGB and
Herbology, can be effectively rebuilt and extended, whilst the
acquisition of Bioharmony and Muscle Science, both well established
brands in their respective markets, provides the critical mass the
business was previously lacking.
The implementation of the restructuring transaction provided the company
with:
(i) a new board of directors and a strong new management team with extensive
brand management experience capable of rebuilding the company and
rapidly expanding its operations;
(ii) critical mass to leverage synergies with trade partners and to reduce
the cost base across all brands owned by the company; and
(iii) following the implementation of the rights offer, sufficient funding to
re-establish and extend the brand line.
3. Prospects and Brand Summary
3.1 Prospects
The focal point of BioScience Brands continues to be on health and
wellness, tapping into the strong global consumer trend towards focusing
on a healthy lifestyle and using products with strong nutritional
benefits. Following the implementation of the restructuring
transaction, BioScience Brands has three operating subsidiaries, being
Bioharmony, Aldabri and BioScience Trading and owns four well-
established brands in the supplements category, being Bioharmony,
Herbology and KGB, all of which fall within the Nutritional Supplements
Category and Muscle Science, which falls within the Sports Nutrition
Category.
Brand Summary
Bioharmony
Bioharmony consists of a comprehensive range of nutraceutical and herbal
products designed to complement today`s modern lifestyle. Bioharmony`s
uniqueness is attributed to its association with Patrick Holford, one of
the world`s leading nutritionists, with whom it has a long-term licence
agreement. Patrick Holford has specifically formulated the Patrick
Holford range of products which comprises superior natural products
based on research conducted at the Institute for Optimum Nutrition.
Bioharmony is a true lighthouse brand that espouses certain values to
which consumers can relate. This presents great opportunity for
Bioharmony to extend beyond supplements into, among other categories,
functional foods and health drinks.
Muscle Science
Muscle Science has established a strong position as the `physique and
performance nutrition` brand, whereas most other competitors are pitched
as more mass market and convenient offerings. The brand has a strong
following in the body-building industry and has recently launched into
the female/lifestyle market with its "Lean Body" sub-brand and into the
endurance sports sector with "Staminade". As it establishes itself
further, Muscle Science will challenge the market on formulation
efficacy and innovation speed to market as the format of product
offerings changes with changing lifestyle requirements. The brand will
continue to reinforce its credibility through continued association with
top athletes, many of whom were selected to compete in the Beijing
Olympic Games.
Herbology
Herbology is a well-known range of nutritional supplements launched in
South Africa in 2001 and subsequently extended from a lifestyle range
with products for libido, stress, mood and memory, amongst others, and
incorporates a more comprehensive daily health maintenance solution.
KGB
Although KGB is currently a small brand, it punches way above its
weight. Its traditional market focus has been the very small anti-
hangover sector, but, as a brand, it has very high awareness and well
established attributes associated with it. KGB`s essence is `a party`
and, as such, it has the potential to extend into a number of other
larger categories.
4. Share Capital
The authorised and issued share capital of the company as at the date of
this revised listing statement is:
R`000
Authorised
5 000 000 000 ordinary shares with a par 500
value of 0.01 cent each
Issued
1 764 522 952 ordinary shares with a par 176 452
value of 0.01 cent each
Share premium 98 477
Total share capital 274 929
4.1 Options on Ordinary Shares
4.1.1 Option Granted to Oxyboost (Proprietary) Limited ("Oxyboost" and
"the Oxyboost Option")
The Oxyboost Option is an American Option and provides Oxyboost
with the right but not the obligation to subscribe for such number
of additional ordinary shares in BioScience Brands on or before 30
June 2009 at an exercise price of 5.25 cents per share, such that
Oxyboost will, both in its own name and through its associates, be
able as at the date of the exercise of the option, to raise its
percentage shareholding in the company to 24%. No option premium
or consideration was given for receipt of the Oxyboost Option,
which was granted as part of the cancellation of the licence
agreement entered into by the previous management team in respect
of the Herbology range of products and the disposal of the
intellectual property rights relating to the Nutrimax brand, as
detailed in the circular.
4.1.2 The Thebe Option
Thebe has been granted the right, but not the obligation, to
subscribe for such number of additional shares, at 3.5 cents per
share, as will enable it to acquire up to a 40% interest in the
company on or before 31 August 2009. The terms of the option
provide that the subscription price payable on the exercise of the
American option or any part thereof may be settled either in cash
or through the injection of Thebe-owned brands into the company.
In the event that Thebe elects to inject brands into the company
when exercising the option or a part thereof, such brands will be
independently valued on the same basis on which Bioharmony and
Muscle Science were valued, being the requirement for any such
brand to yield an internal rate of return of 21.3% after tax.
Shareholders are referred to the cautionary announcement released
on SENS on 30 September 2008, as the company is in final
negotiations with Thebe for the acquisition of the Phyto Nova brand
and business. An announcement in this regard is expected within
the next few days.
4.1.3 The Thebe Extended Option
An additional option has been granted to Thebe which, in the event
of the exercise of the Oxyboost Option, will allow Thebe to
subscribe for additional shares in Bioscience Brands at 3.85 cents
per share, which will enable Thebe to regain up to a 40% interest
in the company on or before 30 September 2009.
4.1.4 The Executive Options
The Executive Options are valid until 31 August 2009 and enable the
executive directors, both existing and appointed prior to the
expiration of the options, on the issue of any additional shares in
the company whether for cash or for acquisitions or the exercise of
the Oxyboost Option and/or the Thebe Option, to subscribe for a
maximum number of 299 098 338 shares in the Company at zero cost.
No option premium or consideration has been given for receipt of
the American Option. The Executive Options have been granted in
order to incentivise the executive directors to strengthen the
Group through acquisitive and organic growth and to restore
shareholder value.
5 Profit Forecast
The table below sets out forecast income statements for BioScience
Brands for years ending 30 June 2009 and 30 June 2010. The profit
forecasts are the responsibility of the Directors. A copy of the
reporting accountants` report on the profit forecast as contained in the
circular is available for inspection at the registered office of the
company. Shareholders attention is drawn to note 11 below the table,
which highlights a subsequent change in approach to the amortisation of
brands.
Profit Profit Forecast
Notes Forecast 30 June 2010
30 June 2009
R`000 R`000
Revenue 2 & 5 103 406 120 362
Cost of sales (46 799) (52 836)
Gross profit 56 617 67 526
Operating 4 (43 482) (48 607)
expenses
Share Option -- --
Expenses
(IFRS2)
EBITDA 13 135 18 919
Depreciation (1 047) (728)
Amortisation 11 (4 600) (4 600)
of brands
Finance Costs (462) -
Net Profit 7 026 13 591
before
taxation
Taxation 8 (3 255) (5 093)
Net Profit 3 771 8 497
after
taxation
Weighted no. 1 764 482 952
of shares in 1 764 482 952
issue
Earnings per 0.21 0.48
share (cents)
Headlines 0.21 0.48
earnings per
share (cents)
1. The profit forecast covers the two years ended 30 June 2009 and 30 June
2010 and is based primarily on Bioharmony; Muscle Science, Herbology and
KGB brands.
2. The board has resolved that the executive directors and key management
be allotted and issued 176 448 295 shares in the company as part of the
Transaction. The board has further resolved that, following the
implementation of the Transaction, and as an additional incentive to the
executive directors and key management, the executive directors and key
management will be granted Executive Options. Should any shares be
issued by the Company on or before 31 August 2009 for any share-based
transaction, including, but not limited to the proposed rights offer
(subject of a separate circular), the exercise of Thebe of their options
and the exercise of Oxyboost of the Oxyboost option, the executive
directors and key management will, at the same time, be entitled to
subscribe for 11.12% of the number of shares so issued (at zero cost);
3. Their exercising of the option to take up shares to a maximum of 40% by
Thebe and the exercising of their option by Oxyboost are subject to the
approval by the shareholders pursuant to the circular to the BioScience
shareholders. The exercising of these options is also subject to the
approval by the respective Boards of directors on or before 31 August
2009 and 30 June 2009 respectively. These transactions and the inclusion
of any brands resulting from these transactions have been excluded from
the profit forecasts.;
4. The split of revenue between Bioharmony, Muscle Science and other brands
has been forecast at 60%, 30% and 10% respectively;
5. The complementary medicines market growth remains at approximately 15%
depending on the product range;
6. It is assumed that some synergies will be achieved through combining of
the businesses. The most significant cost saving is expected to be in
respect of staff costs as the Aldabri and Bioharmony businesses are
integrated;
7. Costs are assumed to increase with inflation estimated at approximately
10% for the year ended 30 June 2009 and 6% for the year ended 30 June
2010 based on the inflation forecast of the Bureau Economic Research;
8. Limited brand extensions have been assumed in the profit forecast.
Projections of a slow-down in growth because of the expected decrease in
inflation, but growth of the business are still being achieved through
increased distribution. However once the products expand to all key
distribution outlets in South Africa then this source of growth will
reduce;
9. No direct exports are assumed;
10. Finance charges at 15% per annum have been projected on the basis of
projected borrowing levels and cash balances on a month to month basis;
11. Intangible assets were assumed to be amortised over a useful life of ten
years which was consistent with the proposed new accounting policies of
BioScience as stated at the end of 28 February 2007. However, per
discussion with the company`s auditors and an assessment of the brands,
it is considered more appropriate to continue with the existing
accounting policy whereby brands are not amortised. This accounting
policy was used for the 16 months period ended 30 June 2008. The
amortisation charge included in the profit forecasts above was R4.6
million per annum. Thus the profit forecast is expected to be higher
than the above reviewed profit forecast.
12. The full statutory tax rate of 28% was used in the forecast for 2009 and
2010; and
13. Depreciation charges on new capital expenditure were calculated in
accordance with the accounting policies of the Group and IFRS.
6. Directors Details
The names and addresses of the directors of BioScience Brands are set
out below:
Name Age Business Qualification Occupation/
Address Function
John (Ian) 61 17 Faraday -- Businessman,
Black* Street Chairman of
Village Main Thebe
Johannesburg Medicare and
Non-executive
Chairman of
BioScience
Brands
Michael 44 10 Ennisdale B.Com Chief
Allan Drive Chartered Executive
Broadway Management Officer of
Durban North Accountant - BioScience
United Kingdom Brands
Peter 43 10 Ennisdale CA(SA) Financial
Ireland Drive Director of
Broadway BioScience
Durban North Brands
Yaseen 51 17 Faraday CA (SA) Businessman,
Bhayat Street Managing
Village Main Director of
Johannesburg Thebe
Medicare and
Non-executive
director of
BioScience
Brands
Mark 40 10 Ennisdale -- Managing
Strydom Drive Director of
Broadway Muscle
Durban North Science and
executive
director of
BioScience
Brands
* British
7. Copies of Documentation
Copies of the circular incorporating the revised listing particulars are
obtainable from the registered office of the Company, Arcay House II,
Number 3 Anerley Road, Parktown, Johannesburg.
8. Proposed Rights Offer
As part of the restructuring transaction, BioScience Brands announced
that the company would be recapitalised via means of a specific issue of
shares for cash to selected corporations and individuals and a rights
offer to existing shareholders. The recapitalisation through the rights
offer was intended to protect the interests of minority shareholders by
providing them with an opportunity to subscribe for additional shares in
the company, thereby limiting the dilutory effect of the restructuring
transaction.
The specific issue of shares for cash was implemented and ratified by
shareholders at the general meeting and has been implemented, whilst the
rights offer could not be implemented whilst the company was remained
suspended.
Following the lifting of the suspension in the trading of its
securities, the company will proceed with the rights offer in order to
raise approximately R18 million by offering for subscription to
BioScience Brands shareholders or their renounces, rights offer shares
at 3.5 cents per share in the ratio of four rights offer shares for
every one BioScience Brands share held, excluding certain excluded
shareholders as detailed below.
In order to enable the Directors to continue to look after the interests
of the minority shareholders, as originally envisaged (which
shareholders signed irrevocable undertakings to vote in favour of the
restructuring transaction, thus enabling the restructuring of the
company to proceed), certain shareholders who received shares in terms
of the restructuring transaction were requested to waive their rights to
subscribe for additional shares in terms of the rights offer. These
shareholders will be defined as "excluded shareholders" in the rights
offer circular which will be posted to shareholders in November 2008.
Final terms of the rights offer will be announced in due course.
The rights offer is supported by an underwriting agreement with
Praesidium Capital Management (Proprietary) Limited in an amount of
approximately R12.9 million and irrevocable undertakings from two
directors, namely Mark Strydom, previously a vendor of Muscle Science
(R4 million) and John Black, the non-executive chairman of the company
(R1 million).
A circular providing full details of the rights offer and incorporating
the letter of allocation in respect of certificated shareholders has
been submitted to the JSE and will be posted to shareholders in due
course.
Johannesburg
16 October 2008
Corporate Advisor to Arcay Designated Advisor
Arcay Merchant (Proprietary) Arcay Moela Sponsors
Limited (Proprietary) Limited
Date: 16/10/2008 17:10:19 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
