HCEG Healthcare Ent.

RNS Number:0632N
Healthcare Enterprise Group PLC
01 February 2008


Friday 1 February 2008

Healthcare Enterprise Group PLC
("the Company" or "HCEG")


Update on the proposed future strategy and term sheet signed for the proposed
merger of Crest Medical group with First Aid Warehouse group ("the Proposed
Merger")


Healthcare Enterprise Group PLC (AIM: HCEG), the international healthcare
products group, is publishing a statement to update the market on its proposed
strategy and to announce the proposed merger of its Crest Medical business with
the First Aid Warehouse group of companies. In addition, the Company will post a
circular to shareholders shortly to convene a general meeting to approve the
implementation of several recently announced steps and a proposed capital
reorganisation of the Company.


Since HCEG announced its interim results on 30 October 2007, the Directors have
completed a number of important initiatives with a view to maximising potential
value for shareholders. An aggregate �2 million was raised in October and
December 2007 which has facilitated the repayment in full of the term loan from
Barclays Bank plc and provided further working capital.

On 18 December 2007, HCEG announced that it had disposed of its interest in
Ridgecrest Healthcare Group Inc in exchange for 1,125,000 shares in ValiRx plc
(an AIM listed therapeutic research and development company) with a contingent
further issue of shares and warrants, as well as shares and warrants in Cancer
Therapeutics Inc, a US shell company.

On 21 December 2007, HCEG announced that it had sold the business and assets of
CICS, its dental business, for a cash sum of �550,000, subject to a final
adjustment for the net tangible assets transferred to the purchaser.

Proposed strategy


The Company currently has three principal businesses:


(i)   Crest Medical Ltd, which provides a comprehensive range of first aid, 
      medical and pharmaceutical products for occupational health and first
      aid professionals, to the retail first aid market and to distributors;

(ii)  Ebiox Ltd, which has developed a unique range of patented cleaning and 
      decontamination products; and

(iii) Reproductive Sciences Ltd, which owns 19.8% of Fertiligent Limited, an 
      Israeli company which has developed a slow release insemination
      device to improve the chance of conception.


The plans for Crest Medical Ltd are set out below. Ebiox Ltd has, in the view of
the Board, an excellent product, but has been restricted by a lack of human and
financial resources. HCEG is working on plans to resolve both of these
restrictions. Similarly, the directors believe that the realisation of value in
Reproductive Sciences Ltd would be best achieved if that company was resourced
separately.


The Directors believe that these three companies should be capable of greater
future value with independent dedicated management and access to third party
funding. HCEG will look to retain a part ownership in each company.


In order to complete the proposed corporate actions, the Board has decided to
change the financial year end of the Company and its subsidiaries to 30 June
2008. The Company expects to publish a second interim results statement for the
six months ended 29 February 2008 in May 2008.


Further fund raising by HCEG


HCEG is today effecting a further fundraising of �250,000 through the issue of
unsecured loan stock. Closing is subject to receipt of funds from the investors.
One of the investors who is subscribing for �125,000 of the unsecured loan stock
is Ludgate Investments Limited ("Ludgate"), a related party by virtue of the
fact that John Gunn is deputy chairman of Ludgate and a Director of HCEG. This
issue will facilitate the payment of the loan to First Aid Holdings Limited
referred to below and provide additional working capital for the Company. The
unsecured loan stock will initially be unconvertible, although HCEG and the
investors intend to negotiate in good faith with a view to agreeing mutually
acceptable terms that would, subject to shareholder approval of certain of the
resolutions to be proposed at the general meeting referred to below, entitle the
investors to convert the unsecured loan stock into equity shares of the Company.
The �250,000 fundraising comprises the balance of the �1.75 million issue of
unsecured loan stock announced on 26 October 2007, and is otherwise being issued
on substantially similar terms to the initial �1.5 million tranche.  As such,
options are being granted to the investors whereby (a) in exchange for the
subscription for an aggregate exercise price of �214,285 in cash, the investors
would acquire 6.43% of the ordinary share capital of Ebiox Ltd (a wholly owned
subsidiary of the Company), and (b) in exchange for the subscription for an
aggregate exercise price of �107,143 in cash, the investors would acquire 7.29%
of the ordinary share capital of Reproductive Sciences Ltd (which is also a
wholly owned subsidiary of the Company).


The Directors, with the exception of John Gunn who is involved in the
transaction as a related party, consider, having consulted with Numis Securities
Limited its Nominated Adviser, that the terms of the unsecured loan stock are
fair and reasonable insofar as its shareholders are concerned.


Proposed merger of Crest Medical Group with First Aid Warehouse Group


HCEG is pleased to announce that it has agreed indicative non-binding terms ("
the Proposed Terms") with First Aid Warehouse Group for the proposed sale of its
loss making Crest Medical business to a new holding company ("First Aid Holdings
Limited") in which HCEG would retain a 49% holding. HCEG plans that it would
retain its shares in First Aid Holdings Limited for the foreseeable future.


As part of the Proposed Terms, First Aid Holdings Limited will simultaneously
acquire First Aid Supplies Ltd, 44 First Aid Ltd, First Aid Warehouse Limited
and Surgicon Healthcare Limited (trading as First Aid Warehouse) ("First Aid
Warehouse Group") and issue to existing shareholders in First Aid Warehouse
Group 51% of the issued share capital of First Aid Holdings Limited as
consideration.



First Aid Warehouse Group is controlled and managed by Alastair Maxwell, who is
a well known participant in the first aid supplies market. Previously he was the
Managing Director of Crest Medical when it was owned by Alliance Unichem PLC.
Since the acquisition of Crest Medical by HCEG in 2004, Mr Maxwell founded and
developed the First Aid Warehouse Group in partnership with Peter Mason and
Matthew Courtney. It is proposed that both would be joining the expanded
business in executive roles. Alastair Maxwell has been appointed as consulting
Managing Director of Crest Medical Limited and is controlling the day to day
operations of that company, which made a loss of �0.8m in the six month period
to 31 August 2007. It is proposed that Alastair Maxwell would join the board of
Crest Medical after the merger.


The combined business, which is proposed to be primarily located at the current
Crest Medical facilities in Warrington, is expected to benefit from the new
management team's on-line retailing skills combined with Crest Medical's large
customer base and warehouse facility.


The Board believes that the potential for growth in the merged entity, should
completion occur, would provide greater long term value for shareholders of
HCEG. The HCEG Directors believe that the merger would convert the present
business into a profitable entity capable of future growth. The ownership
structure agreed reflects the fact that the First Aid Warehouse Group will
provide the management of the merged entity.


The Proposed Merger will be conditional upon the approval of the HCEG
shareholders pursuant to AIM Rule 15 for Companies. It is currently expected
that the definitive sale and purchase agreement will be signed in late February
or early March 2008 and that a further circular will then be posted to
shareholders to, inter alia, convene a general meeting to approve the
transaction at that point.


Under the Proposed Terms, First Aid Holdings Limited would receive a one year
loan of �250,000 from HCEG for additional working capital. First Aid Holdings
Limited is considering a separate fund raising exercise of circa �500,000 from
new investors to provide additional working capital and to fund identified
growth opportunities. It is proposed that this fund raising will be undertaken
when the business plan of the combined First Aid Holdings Limited group has been
finalised.


It is important to point out that whilst the Board is confident that the
Proposed Merger will progress, there is no certainty that it will complete or
that the terms of the Proposed Terms may not change from those detailed above.
Further details of the Proposed Merger will be announced in due course.


Convening of General Meeting


A circular will be posted shortly to convene a general meeting at which
resolutions will be proposed, inter alia, to reorganise the share capital of the
Company (necessary to facilitate future equity issues), to give authority to the
Directors to allot equity securities, to disapply the statutory pre-emption
rights, and to approve the ability of Nicholas Brigstocke to exercise the
options granted to him pro rata to his participation in the October placing.


Mark Tompkins, Chairman of HCEG, said:


"The Board believes that the proposed strategy of the Group is the best way to
realise value for HCEG shareholders. The introduction of sufficiently
incentivised management teams supported by funds from investors interested in
specific sectors on a business by business basis is, we feel, most likely to
achieve optimal values for the Company's three principal businesses.


"In particular, I am very pleased that Alastair Maxwell and his team are joining
our Crest business. This new talent will give Crest added industry experience
and an expanding on-line sales capability which in the Board's view will, over
time, allow Crest again to become a leading industry player in the first aid
supplies market."


Alastair Maxwell, Managing Director of Crest Medical and First Aid Warehouse,
said:


"The Crest Medical brand is still well respected in the industry in spite of the
difficulties experienced in the past few years, and we are looking forward to
re-establishing the business, once combined with our own growing on-line
business, as a major force in the industry."


Enquiries:

Healthcare Enterprise Group                        + 44 (0)1925 898 200
Lyndon Gaborit, Executive Deputy Chairman

Numis Securities                                   +44 (0) 20 7260 1000
David Poutney

College Hill                                       +44 (0) 20 7457 2020
Adrian Duffield/Jon Davies




                      This information is provided by RNS
            The company news service from the London Stock Exchange
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