| Mon 12 Oct 2009, 15:37 | | SKW / SKWN - Disposal And Withdrawal Of The Cautionary Announcement |
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SKW SKWN
SKW
SKW / SKWN - Disposal And Withdrawal Of The Cautionary Announcement
SKINWELL HOLDINGS LIMITED
(formerly Placecol Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2003/025374/06)
JSE code: SKW & SKWN
ISIN: ZAE000135893 & ZAE000139499
("Skinwell" or "the company")
DISPOSAL BY SKINWELL OF THE ENTIRE ISSUED SHARE CAPITAL OF CW PHARMACEUTICALS
(PTY) LIMITED ("CW"), A WHOLLY OWNED SUBSIDIARY OF SKINWELL, AND WITHDRAWAL OF
THE CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcements dated 26 August 2009 and 23
September 2009, shareholders are advised that an agreement ("Disposal
Agreement") has been entered into between Skinwell, Mr. CW Moolman,
Charles Moolman Trust, Kuvula Trade 100 (Proprietary) Limited (to be
renamed Pharmacap Holdings (Proprietary) Limited ("PharmaCap") and CW in
terms of which:
- Skinwell has, subject to the fulfilment of certain conditions
precedent set out in paragraph 8 hereunder, sold the entire issued
share capital of CW ("CW shares") (but not its claims on loan
account against CW in the sum of R2 523 133 ("the CW claims")), to
the Moolman Trust and PharmaCap ("the purchasers");
- Skinwell has furnished warranties as are usual in an agreement of
this nature to the purchasers.
2. BACKGROUND INFORMATION
Skinwell carries on business as marketers, distributors, retailers and
providers of skin and health care products and services and is a
franchisor of the Placecol and DNB brand beauty products and services.
CW is a manufacturer of Placecol and DNB branded products ("CW
Business").
3. RATIONALE FOR THE DISPOSAL
The directors of Skinwell have taken a strategic decision to focus the
company on its core activities, i.e. that of franchisor, retailer and
provider of its own branded products and services and no longer consider
the CW Business as core to its activities. Following implementation of
the disposal, CW will act as a third party contract manufacturer to
Skinwell, manufacturing Placecol and DNB branded products for sale to
Skinwell.
4. DISPOSAL CONSIDERATION
The disposal consideration payable for the CW shares is R1 693 258, being
the agreed net asset value of CW on 1 September 2009. It has however
been agreed that:
- in the event that the 12 642 581 Skinwell shares owned by Mr. CW
Moolman ("Moolman`s Skinwell Shares") are sold by Skinwell (as
contemplated hereunder) at an average price per Skinwell share which
is more than R0.143, being the net tangible asset value per Skinwell
share at 31 August 2009, then and in such event the disposal
consideration will be increased by an amount equal to the average
excess achieved per Moolman`s Skinwell share sold, multiplied by
12 642 581; or
- in the event that Moolman`s Skinwell Shares are sold by Skinwell at
an average price per Skinwell share which is less than R0.143, then
and in such event the disposal consideration will be reduced by an
amount equal to the average shortfall incurred per Moolman`s
Skinwell Share sold, multiplied by 12 642 581.
The disposal consideration shall be discharged in the following manner
and on the following terms:
- R1 000 000 has been paid to Skinwell in cash on the date of
signature of the Disposal Agreement, on the basis that if the
conditions precedent to which the Disposal Agreement is subject are
not fulfilled, such sum shall be refunded to the purchasers on
demand;
- the balance of the disposal consideration shall be discharged as
follows:
- The board of directors of Skinwell shall, within a period of 21
days after the date of signature of the Disposal Agreement,
make an election in writing whether to repurchase Moolman`s
Skinwell Shares for an aggregate repurchase price of R1 807 889
or to sell Moolman`s Skinwell Shares, and failing such election
in writing, the board of directors of Skinwell shall be deemed
to have elected that the company shall repurchase Moolman`s
Skinwell Shares, such repurchase of Moolman`s Skinwell Shares
being subject to the requisite approval of Skinwell
shareholders.
- In the event that the Skinwell board elects to sell Moolman`s
Skinwell Shares or the proposed repurchase thereof is not
approved by shareholders, such sale will be effected in an
orderly fashion so as to obtain the best possible price for
such Skinwell shares on the JSE.
- In the event that Moolman`s Skinwell shares are repurchased:
- such portion of the repurchase price which is equal to the
balance of the disposal consideration will be discharged
by way of set-off against such balance of the disposal
consideration;
- the balance of the repurchase price will be retained by
Skinwell as a partial repayment to Skinwell of the CW
claims.
- In the event that Moolman`s Skinwell shares are sold:
- such portion of the sale proceeds as is equal to the
balance of the disposal consideration shall be paid in
cash to Skinwell;
- the balance of the sale proceeds shall be paid to Skinwell
as a partial repayment of the CW claims.
5. FORMULATIONS AND INTELLECTUAL PROPERTY
Ownership of the formulations relating to the "Placecol and DNB branded
products" and all intellectual property of the Skinwell group brands will
continue to vest in Skinwell.
6. REPAYMENT OF THE CW CLAIMS
The CW claims are to be discharged by CW in the following manner and upon
the following terms:
- a portion of the CW claims are to be repaid as set out in paragraph
4 above;
- the balance of the CW claims is to repaid in full within a period of
24 months from the effective date of the Disposal Agreement;
- the CW claims will attract interest at the prime rate;
- Skinwell will be entitled to register a Notarial Bond over CW`s
stock as security for the repayment of the balance of the CW claims.
7. EFFECTIVE DATE
The effective date of the Disposal Agreement is 1 September 2009, subject
to the fulfilment of the conditions precedent set out in paragraph 8
hereunder.
8. CONDITIONS PRECEDENT
The disposal is conditional, inter alia, upon:
- the approval of the transaction by Skinwell shareholders; and
- to the extent necessary, all of the regulatory approvals required to
give effect to the disposal.
9. RESTRAINT AND MANUFACTURING AGREEMENT
CW, Mr. CW Moolman and the purchasers have undertaken in favour of the
Skinwell group that they shall not, without the prior written consent of
Skinwell, for a period of five years from the date of signature of the
Disposal Agreement and in the Republic of South Africa, be interested in
or concerned with any business which is competitive or similar to the
business conducted by any member of the Skinwell group.
Skinwell has entered into a manufacturing agreement with CW on market
related terms.
10. FINANCIAL EFFECTS OF THE DISPOSAL
The unaudited pro forma financial effects, for which the directors are
responsible, are provided for illustrative purposes only to show the
effect of the disposal on earnings and headline earnings per share as if
the transaction had taken effect on 1 March 2009 and on net asset value
and net tangible asset value per share as if the disposal had taken
effect on 31 August 2009. Because of their nature, the unaudited pro
forma financial effects may not give a fair presentation of the Group`s
financial position, changes in equity, results of operations or cash
flows. The unaudited pro forma financial effects have been compiled from
the audited consolidated financial statements for the year ended 28
February 2009 and are presented in a manner consistent with the format
and accounting policies adopted by Skinwell and have been adjusted as
described in the notes below:
Unaudited Unaudited (%)
Before the After the
Notes disposal disposal
Loss per share (3.3) (2.9) 12.1
(cents)
Headline loss per (3.8) (3.6) 5.3
share (cents)
Fully diluted (1.4) (1.1) 21.4
earnings per share
(cents)
Fully diluted (1.6) (1.3) 18.8
headline earnings
per share (cents)
Net asset value 37.4 41.8 11.8
per share (cents)
Net tangible asset 27.3 31.0 13.6
value per share
(cents)
Fully diluted net 18.3 19.1 3.2
asset value per
share (cents)
Fully diluted net 14.3 15.0 4.9
tangible asset
value per share
(cents)
Weighted average 98 405 322 85 762 741 -
number of shares
in issue (000`s)
Fully diluted 236 172 773 223 530 192 -
weighted average
number of shares
in issue (000`)
Shares in issue at 98 405 322 85 762 741 -
year end (000`s)
Notes:
1. The "Unaudited Before the disposal" column reflects the unaudited
results of Skinwell for the six months ended 31 August 2009.
2. Earnings and headline earnings per share effects are based on the
following assumptions and information:
- the disposal was effective on 1 March 2009;
- CW made a loss of R702k after taxation for the six months ended
31 August 2009.
3. Net asset value and tangible net asset value per share effects are
based on the following assumptions and information:
- the disposal was effective on 31 August 2009;
- the net asset value of CW as at 31 August 2009 was R1,69
million.
shareholders approved the cancelation of Moolman`s Skinwell
shares.
- the estimated expenses relating to the transaction amount to
R280k and will be written off against share premium.
11. APPLICATION OF THE DISPOSAL PROCEEDS
The proceeds of the disposal will be used mainly to cover the ongoing
working capital requirements of the Skinwell group.
12. CLASSIFICATION OF THE TRANSACTION
In terms of the Listings Requirements of the JSE Limited ("JSE"), the
disposal is classified as a related party transaction since Mr. CW
Moolman was the former executive chairperson of Skinwell and a material
shareholder in Skinwell. The disposal however falls outside of the
requirements of section 228 of the Companies Act (No. 61 of 1973), as
amended, since the CW shares do not constitute the whole or a greater
part of the undertaking or assets of Skinwell.
Accordingly, a special resolution is not required to be passed by the
Skinwell shareholders approving of the disposal, but shareholder approval
of the disposal by a simple majority of the Skinwell shareholders
(excluding the related party), present and voting, and an independent
opinion relating to the fairness of the disposal, is required in terms of
the Listings Requirements of the JSE.
A circular, containing full details of the disposal, prepared in terms of
the Listings Requirements of the JSE and containing a notice of general
meeting of shareholders, will be dispatched to shareholders in due
course.
13. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Having regard to the information set out above, the cautionary
announcement is hereby withdrawn.
Midrand
12 October 2009
Lead Designated Adviser
Grindrod Bank Limited
Corporate Adviser and Designated Adviser
Vunani Corporate Finance
Legal Adviser
Fluxmans Incorporated
Date: 12/10/2009 15:37:01 Produced by the JSE SENS Department.
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