| Thu 15 Apr 2004, 16:41 | | Disposal Of The |
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Forim Holdings Limited / Alliance Pharmaceuticals Limited - Disposal Of The
Business Of Isotec Nutrition (Pty) Limited, Trading Statement And Further
Cautionary Announcement
Forim Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1986/004111/06)
Share code FOM ISIN ZAE000002689
("Forim")
ALLIANCE PHARMACEUTICALS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1981/006145)
Share code ALN ISIN ZAE000011110
Share code ACN ISIN ZAE000011847
("Alliance")
(collectively, the "companies")
DISPOSAL OF THE BUSINESS OF ISOTEC NUTRITION (PTY) LIMITED, TRADING STATEMENT
AND FURTHER CAUTIONARY ANNOUNCEMENT
1. Introduction
Shareholders of the companies are referred to the joint renewal of cautionary
announcement published on SENS on 20 January 2004 ("the cautionary renewal
announcement").
Sasfin Corporate Finance is authorised to advise that Alliance, Isotec
Nutrition (Pty) Limited, a subsidiary of Alliance ("Isotec") and Isotec"s
minority shareholder, Iain Rosekilly ("Rosekilly"), have entered into an
agreement ("the agreement") with Fresenius Kabi South Africa (Pty) Limited
("FKSA") to dispose of the business of Isotec for a cash consideration of R25
million ("the disposal consideration") subject to the fulfilment or waiver of
certain suspensive conditions ("the disposal").
The disposal includes all the business assets of Isotec, being the fixed
assets, stock, intellectual property, licences and goodwill ("the sale
assets") but excludes the debtors and all the liabilities of Isotec ("the
excluded assets") at the effective date and, once unconditional, will be
effective from 1 March 2004 ("the effective date").
The purchase consideration of R25 million is payable as soon as the disposal
becomes unconditional, of which R4 million will be retained in a trust account
to be released to the seller on 1 September 2004, provided that Alliance,
Isotec and Rosekilly are not in breach of any of their obligations and
undertakings in terms of the agreement.
The amounts referred to above will attract interest for the benefit of the
sellers at the prime bank overdraft rate minus 4,5% thereof, calculated from
the effective date to the date of payment.
2. Group structure
Alliance owns 100% of Alliance Distribution (Pty) Limited which in turn owns
80% of Isotec. The balance of the shares in Isotec are owned by Rosekilly.
Alliance has an issued share capital of 68 500 000 ordinary shares of 1 cent
each ("Alliance ordinary shares") and 27 176 553 N-ordinary shares of 0,01
cent each ("Alliance N-ordinary shares"). The Alliance ordinary shares and
Alliance N-ordinary shares rank pari passu in all respects other than voting
rights. Each Alliance N-ordinary share carries one vote and each Alliance
ordinary share carries 100 votes.
Forim holds 44 515 150 Alliance ordinary shares and 12 850 849 Alliance N-
ordinary shares, representing 64,92% of the voting rights in Alliance.
3. Shareholder and other regulatory approvals
As a result of the group structure the disposal is a category one disposal in
terms of the Listings Requirements of the JSE Securities Exchange South Africa
("JSE") for Alliance as well as its holding company Forim. As such
shareholders of the companies will be required to approve the disposal in
general meeting.
The Competition Commission has, in terms of the Competition Act, 1998 (Act 89
of 1998), already unconditionally approved the disposal.
4. Nature of business of Isotec
Isotec carries out the business of the admixture of parenteral nutrition,
being the filling of intravenous bags in high-tech mixing isolators. Isotec
supplies hospitals throughout South Africa and is one of the only admixture
providers in the country.
5. Rationale
FKSA is the local wholly-owned subsidiary of Fresenius Kabi GmbH of Germany
("FKG"). FKSA is the sole supplier of raw materials for admixture to Isotec.
These raw materials are the registered products of FKSA. FKSA is a major
supplier of pharmaceuticals and enteral and parenteral nutrition to all
healthcare providers in South Africa and carries out all the marketing
activities in respect of Isotec"s admixed product.
FKG worldwide, other than in South Africa, carries out its own admixture
process. In South Africa, Isotec has been in the advantageous position to
carry out FKSA"s admixture process. Isotec"s supply agreement with FKSA
terminated on 31 December 2003. FKSA advised that the supply agreement would
not be renewed nor would the terms be extended as they are intent on the
vertical integration of their business in South Africa. In this regard FKSA
offered to purchase the sale assets from Isotec.
The alternative to the disposal was to enter into competition with FKSA. This
was not viable as all other parenteral nutrition ingredient providers in South
Africa currently represent themselves locally and hence would not require the
services of Isotec. Any supplier new to South Africa would have to first
register its raw materials in terms of the Medicines and Related Substances
Control Act, 1965. This is a lengthy process and can take up to a few years.
6. Suspensive conditions
The disposal is subject to, inter alia, the passing of the requisite ordinary
resolutions required to ratify the disposal by Forim and Alliance shareholders
in general meeting. The remaining suspensive conditions have been, or will be
fulfilled or waived, prior to the date of the meetings for the passing of the
resolutions.
7. Financial effects
The table below sets out the pro forma financial effects of the disposal on
Forim and Alliance"s earnings per share, headline earning per share, net asset
value per share and tangible net asset value per share, respectively.
The figures contained in the tables below have been based on the published
reviewed interim results for the half-year ended 31 August 2003 and are
presented for illustrative purposes only on the basis stated.
(a) Forim
After the
Before(1) disposal(2) Change
(cents) (cents) (%)
Earnings per share 5,2 1,8 (65,4)
Headline earnings per share 6,2 2,8 (54,8)
Net asset value per share 116,9 133,8 14,5
Net tangible asset value per share 61,2 78,1 27,6
Notes:
1. The figures in the "Before" column have been extracted from Forim"s
reviewed interim results for the half-year ended 31 August 2003.
2. The figures in the "After the disposal" column reflect the pro forma
effects on the assumption that the disposal was effected on 1 March 2003 for
earnings purposes and on 31 August 2003 for asset value purposes.
(b) Alliance
After the
Before(6) disposal(7) Change
(cents) (cents) (%)
Earnings per share 3,9 0,8 (79,5)
Headline earnings per share 3,9 0,8 (79,5)
Net asset value per share 74,6 89,1 19,4
Net tangible asset value per share 57,6 72,2 25,3
Notes:
3. The figures in the "Before" column have been extracted from Alliance"s
reviewed interim results for the half-year ended 31 August 2003.
4. The figures in the "After the disposal" column reflect the pro forma
effects on the assumption that the disposal was effected on 1 March 2003 for
earnings purposes and on 31 August 2003 for asset value purposes.
These pro forma financial effects are the responsibility of the directors of
Forim and Alliance, respectively.
8. Opinions and recommendations
The boards of directors of the companies ("the boards") are of the opinion
that the terms and conditions of the disposal are fair and represent the best
way to realise value on the investment in Isotec. The boards therefore
recommend that Forim and Alliance shareholders vote in favour of the requisite
resolutions to ratify the disposal.
Directors of Forim holding 34,78% of Forim ordinary shares have undertaken to
vote in favour of the disposal.
Directors of Alliance holding 20,71% of Alliance ordinary shares and 29,02%
of Alliance N-shares have undertaken to vote in favour of the disposal.
9. Irrevocable undertakings
Forim has obtained irrevocable undertakings from Forim shareholders holding
not less than 50% of the entire issued share capital of Forim to vote in
favour of the requisite resolutions to ratify the disposal.
As Forim controls 64,92% of the voting rights in Alliance, Alliance
shareholders holding not less than 64,92% of the voting rights have agreed to
vote in favour of the disposal.
10. Documentation
A circular to the companies" shareholders setting out, inter alia, details of
the disposal, a Forim notice of general meeting and form of proxy and an
Alliance notice of general meeting and form of proxy is currently being
prepared and will be posted to the companies" shareholders in due course.
11. Trading statement and further cautionary
Shareholders of the companies are advised that the results for the year-end
29 February 2004 for both Forim and Alliance will show a substantial
improvement on the companies" results of the previous comparative period. The
word substantial in this context is defined as meaning a difference equal to
or greater than 30%. The financial information on which the above trading
statement is based has not been reviewed or reported on by the companies"
auditors.
In addition, certain negotiations referred to in the cautionary renewal
announcement are continuing. These negotiations may result in a change in
control in the companies, an offer to minority shareholders and/or an affected
transaction in terms of the Securities Regulation Code on Take-overs and
Mergers ("the transaction") and as such may have an effect on the price at
which the companies" securities trade on the JSE.
As a result, shareholders of Forim and Alliance are advised to exercise
caution when dealing in the companies" securities until a further announcement
is made.
15 April 2004
Johannesburg
Sponsor and corporate advisor to the companies
Sasfin
Corporate Finance
A Division of Sasfin Bank Limited
Legal advisor to the companies
BLUEMENTHAL ATTORNEYS
Reporting accountants
Grant Thornton
Corporate Finance (SA)
Accountants, Auditors & Business Advisors
Legal advisors to FKSA
Deneys Reitz Attorneys Inc.
Reg. No. 1984/003385/21
Date: 15/04/2004 04:01:12 PM Produced by the JSE SENS Department
