| Thu 22 Sep 2011, 14:00 | | BIO - BioScience Brands Limited - Management agreement containing an Issue of |
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BIO
BIO
BIO - BioScience Brands Limited - Management agreement containing an Issue of
shares to Akacia Healthcare Proprietary Limited and shareholder loans
BioScience Brands Limited
(Registration number 2005/005805/07)
Incorporated in the Republic of South Africa
Share code: BIO
ISIN code: ZAE000115036
("BioScience" or "the Company")
Management agreement containing an Issue of shares to Akacia Healthcare
Proprietary Limited ("Akacia") and shareholder loans
1 Introduction
Shareholders are referred to the various cautionary announcements published
on the Securities Exchange News Service ("SENS") of the JSE Limited ("the
JSE") the most recent being 8 August 2011 as well as to the announcement of
18 February 2011 whereby shareholders were advised that BioScience had
agreed to outsource a significant portion of its operational head office
functions ("Outsourcing") to Akacia with effect from 1 April 2011.
Shareholders are further advised that a series of stand-alone but
interrelated agreements covering
- the management agreement with Akacia (which includes the terms for
the Outsourcing)("the Management Agreement");
- a loan by Akacia (the Akacia loan");
- a loan by Herbal and Homeopathic (Proprietary) Limited, a subsidiary
of Beige Holdings Limited("the H&H Loan");
- a share issue to Akacia, and
- a deed of security in respect of trade marks
(collectively, the "Substantive Agreements"),
have been signed, the last of which is in the process of being lodged
for registration.
2. Rationale
The combined effects of the Substantive Agreements, are to provide
BioScience with additional funding, reduce company overheads and increase
market representation.
The Akacia Loan and the H&H Loan, together with the proceeds of the Phyto
Nova brand disposal the subject of the SENS announcement of 10 February
2011, will be used to fund restructuring costs, the repayment of
liabilities and support ongoing working capital.
The Management Agreement
The Management Agreement provides for the outsourcing of Bioscience`s sales
and back-office functions as well as those of its subsidiary companies, to
Akacia, with effect from 1 April 2011. It however excludes strategic
planning, corporate finance functions, investor and securities exchange
relationships, legal, SARS relationships as well as financial reporting.
As a consequence of the Management Agreement, BioScience has been able to
close its Durban office, leading to annual savings, whilst enjoying access
to Akacia`s national sales infrastructure.
The Management Agreement will continue for an initial period of three years
("the Initial Period") and thereafter,indefinitely, subject to Key
Performance Indicators ("KPI`s") as will have been agreed annually in
advance by the BioScience board as part of the annual budget process for
BioScience.
In the event that Akacia fails to deliver on all or some of the KPI`s,
BioScience may elect to terminate the Management Agreement by the giving of
6 month`s written notice. Notice may only be given after the completion of
the first twelve months of the Initial Period.
While Akacia fulfils its obligations under the management agreement,
BioScience will issue a maximum of 460 062 389 ordinary shares to Akacia or
its nominee at par value in the following tranches:
* 137 966 461 ordinary shares on obtaining shareholder approval or as
soon as possible thereafter;
* 151 727 583 ordinary shares on 1 March 2012, or as soon as possible
thereafter; and
* 170 368 345 ordinary shares on 1 March 2013, or as soon as possible
thereafter.
The three issues represent 15% of the current issued share capital of
BioScience.
In terms of the JSE Limited Listing Requirements, Akacia is considered to
be a related party. Shareholder`s approval will be sought in due course.
If the shareholder and regulatory consents are not obtained, BioScience
will be required to pay Akacia, an incentive bonus equal to 20% of the
BioScience net profit before tax as reported in the audited annual
financial statements, which must be calculated and paid bi-annually in
arrears on 1 April and 1 October each year.
If at any time during the tenure of the Management Agreement Bioscience
proposes to issue additional shares to independent parties, Akacia will be
granted an opportunity to acquire an additional number of shares in
BioScience at the same terms and conditions applicable to the independent
parties, equating to 15%.
The Akacia Loan and the H&H Loan
The Management Agreement provides, inter alia, for the Akacia Loan in terms
of which BioScience is able to borrow from Akacia up to a maximum of R 2
million which BioScience will then be able to on-lend to its subsidiaries,
as appropriate. The Akacia Loan will attract interest of at the Prime Rate
plus 2% and is subject to repayment by way of monthly instalments
(inclusive of interest) by no later than 1 July 2014.
The H&H Loan concluded between BioScience and H&H, allows for BioScience to
borrow up to a maximum amount of R2, 5 million, which BioScience will,
should it be necessary, on-lend to its subsidiaries. The H&H Loan will
attract interest at Prime Rate plus 3% and is subject to repayment by way
of equal monthly instalments (inclusive of interest) by no later than 30
August 2012.
The Akacia loan will be secured by a notorial bond over the movable assets
of BioScience and its subsidiaries, a cession of book debts and a
registration of a deed of security over the BioScience trademarks, all of
which are secondary to that held by the Company`s bankers, where
applicable.
The H&H Loan will be secured by means of notorial bond over the movable
assets of BioScience and its subsidiary companies, a cession of book debts
and a registration of a deed of security over the BioScience trademarks,
all of which are secondary to that held by the Company`s bankers, where
applicable.
To the extent that Akacia and H&H have common securities, in the event of
default, they shall have a proportionate claim to the proceeds of said
security.
If and when BioScience will have drawn down the maximum amounts available
in terms of both the Akacia Loan and H&H Loan, respectively, Akacia will
grant to BioScience a further amount of R1 million by way of a deferment of
management fees owed no later than 31 December 2012.
3. Further Cautionary
As a result of the Pro Forma financial effects of the subject matter of
this announcement not having been disclosed in this announcement,
shareholders are advised to continue to exercise caution when dealing in
the Company`s securities until a further announcement is made.
4 General Meeting
A circular convening a general meeting of shareholders to approve the Share
Issue and to deal with related matters is in the course of preparation and
subject to the prior approval of the JSE and will be posted to
shareholders as soon as practicably possible.
Isando
22 September 2011
Designated Advisor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
Date: 22/09/2011 14:00:01 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.
