Proposed Merger
March 18 2008 - 7:15AM
UK Regulatory
RNS Number:3646Q
Healthcare Enterprise Group PLC
18 March 2008
Private & Confidential
Tuesday 18 March 2008
Healthcare Enterprise Group PLC (the "Company" or "HCEG")
Proposed merger of Crest Medical Limited ("Crest Medical") with First Aid
Warehouse Group and Notice of EGM
HCEG (AIM: HCEG) has now entered into a conditional contract with First Aid
Holdings Limited ("FAH") through its wholly owned subsidiary Healthcare
Enterprise Limited ("HEL") for the proposed merger of its Crest Medical business
with the First Aid Warehouse group of companies (the "Proposed Merger"). On the
basis set out below, this is equivalent to a consideration of approximately �2.5
million. On 1 February 2008, the Company announced the Directors' proposed
strategy for HCEG and gave outline details of the Proposed Merger.
HEL has entered into a share purchase agreement (the "Share Purchase Agreement")
with FAH to dispose of, subject to, inter alia, shareholder approval, 100 per
cent. of Crest Medical to FAH in exchange for which HEL will, on completion, be
allotted shares in FAH ("FAH Shares") equal to approximately 44.55 per cent. of
the issued share capital of FAH. Following completion of the Proposed Merger,
HCEG, through HEL, intends to retain its interest in FAH.
Prior to completion of the Share Purchase Agreement ("Completion") FAH will
complete a separate financing (the "FAH Financing") whereby it will issue a
minimum of 220,000 FAH Shares up to a maximum of 320,000 FAH Shares at a price
of �2.50 per FAH Share, raising a minimum of �550,000 (before expenses) or a
maximum of �800,000 (before expenses).
Details of the Proposed Merger
Under the terms of the Share Purchase Agreement, HEL will dispose of 100 per
cent. of the entire issued share capital of Crest Medical for a consideration
payable on Completion to be satisfied by the allotment of 980,000 FAH Shares,
representing (assuming the minimum FAH Financing) approximately 44.55 per cent.
of the entire issued share capital of FAH. Crest Medical has a book value of
�2.5 million in HCEG's accounts at 31 August 2007 and made an operating loss of
�0.8 million in the six month period to 31 August 2007.
As part of the Proposed Merger, FAH will acquire First Aid Supplies Ltd, 44
First Aid Ltd, First Aid Warehouse Limited and Surgicon Healthcare Limited
(together, trading as First Aid Warehouse) and will issue 1,000,000 FAH Shares
to the vendors of First Aid Warehouse Group (the "First Aid Warehouse Group
Vendors"), representing (assuming the minimum FAH Financing) approximately 45.45
per cent. of the issued share capital of FAH, as consideration. The respective
allocation of the share capital of FAH (assuming the minimum FAH Financing,
45.45 per cent. to the First Aid Warehouse Group Vendors and 44.55 per cent to
HEL) reflects the fact that the First Aid Warehouse Group Vendors will provide
the future management of FAH. However, none of the directors of First Aid
Warehouse Group will be joining the board of HCEG.
Before Completion, FAH will raise a minimum of �550,000 (before expenses) by
placing a minimum of 220,000 FAH Shares at a price of �2.50 per FAH Share with
investors (the "FAH Financing Investors"), representing (assuming the minimum
FAH Financing) 10 per cent. of the enlarged share capital of FAH. The FAH
Financing is intended to fund future growth opportunities and provide additional
working capital and implies that at Completion, FAH is valued at �5.5 million
and that Crest Medical is valued at �2.5 million. The directors of FAH reserve
the right to place up to a total of 320,000 FAH Shares at Completion to satisfy
excess FAH Financing Investor demand.
Crest Medical will enter into a loan agreement with HCEG under which it will
borrow up to �250,000 from HCEG for one year for additional working capital (the
"Loan Agreement").
The Proposed Merger is deemed to be a related party transaction for the purpose
of Rule 13 of the AIM Rules, principally by virtue of Alastair Maxwell acting as
a director of Crest Medical and being a director of FAH and First Aid Warehouse.
The Directors consider, having consulted with Numis Securities Limited as
Nominated Adviser, that the terms of the Proposed Merger are fair and reasonable
insofar as the Shareholders are concerned.
Completion is conditional upon the following:
* the approval of the shareholders of HCEG pursuant to Rule 15 of the AIM
Rules for Companies;
* completion of the FAH Financing;
* the agreement of the terms of a shareholders' agreement to be made between
HEL, FAH and any other shareholders of FAH;
* the entering into by HCEG and Crest Medical of the Loan Agreement; and
* completion of the First Aid Warehouse Group Share Purchase Agreement in its
agreed form.
The Board believes that the Proposed Merger provides a platform for profitable
growth in the Crest Medical business as enlarged by the Proposed Merger and
should create greater long term value for shareholders in HCEG than the business
in its current form.
As at the date of this Circular, the shareholders in FAH are, and immediately
following Completion are expected to be, as follows:
Name Number of FAH Number of FAH Percentage1 of Number of FAH Percentage1 of
Shares as at the Shares at issued FAH Shares at issued FAH Shares
date of this Completion Shares at Completion at Completion
Circular assuming the Completion assuming the assuming the
minimum FAH assuming the maximum FAH maximum FAH
Financing minimum FAH Financing Financing
Financing
HCEG* 0 980,000 44.55 980,000 42.61
Alastair Maxwell 100 300,000 13.64 300,000 13.04
Peter Mason 0 300,000 13.64 300,000 13.04
Matthew Courtney 0 300,000 13.64 300,000 13.04
Summit Records 0 100,000 4.55 100,000 4.35
Limited
FAH Financing 0 220,000 10.00 320,000 13.91
Investors
*Shareholding held through its wholly owned subsidiary, Healthcare Enterprise Limited.
1 All percentages are approximate
Information on and background of FAH
FAH was incorporated on 25 January 2008 solely for the purpose of the Proposed
Merger and, pursuant to the First Aid Warehouse Group Share Purchase Agreement,
will hold 100 per cent. of the entire issued share capital of First Aid Supplies
Ltd, 44 First Aid Ltd, First Aid Warehouse Limited and Surgical Healthcare
Limited (trading as First Aid Warehouse). The shareholders of FAH are currently
as set out in the table above.
Alastair Maxwell, who leads the management team in running the First Aid
Warehouse Group, 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 all three will be joining
the expanded business in executive roles. Alastair Maxwell was appointed as
consulting Managing Director of Crest Medical on 2 January 2008 and has been
controlling the day to day operations of that company since such date. It is
proposed that Alastair Maxwell will join the board of Crest Medical after the
Proposed Merger.
HEL, FAH and all other shareholders of FAH will enter into a shareholders'
agreement on Completion which will provide that the board of FAH shall consist
of five directors, two being appointed by HEL, two by the First Aid Group
Vendors and one being appointed by the investors under the FAH Financing
Investors. HEL shall be entitled to appoint the Chairman of the board of FAH.
Reasons for the Proposed Merger and future strategy
The Proposed Merger announced today is in line with HCEG's strategy of creating
a portfolio of interests in a number of healthcare related businesses which
offer substantial growth potential. This strategy requires the disposal of
majority stakes in HCEG's principal subsidiaries and the introduction of new
management and finance to those businesses. The Directors believe that Crest
Medical, and in due course Ebiox Limited and Reproductive Sciences Limited (the
other principal subsidiaries within HCEG), will achieve greater value as
independent but partly owned entities, rather than as wholly owned subsidiaries
of HCEG.
Shareholders should note that whilst the Directors believe the Proposed Merger
will benefit HCEG by relieving it of the burden of the losses and cash outflow
from Crest Medical, HCEG will still be dependent upon, inter alia, the exercise
of options to subscribe for shares in Ebiox Limited or Reproductive Sciences
Limited or other corporate actions as a means of raising further capital to
address its near and medium term working capital requirements. The combined
First Aid Warehouse Group / Crest Medical business is expected to achieve a
positive EBITDA result within the first 12 months following the Proposed Merger.
FAH will then have the ability to grow through the better servicing of existing
and potential new customers, regaining lost customers, through new product
offerings and through the expansion of its channels to market, including on-line
sales. The combined business will be primarily located at the current Crest
Medical facilities in Warrington and will utilise its large warehouse facility.
HCEG through HEL intends to retain its interest in FAH. Once the intended
further disposal of interests in Ebiox Limited and Reproductive Sciences Limited
have taken place by merging them with other companies in which HCEG plans to
retain a substantial minority interest, HCEG intends to continue as an
investment company with greatly reduced operating expenses. HCEG will aim to
manage its investments for long term capital gain.
Notice of EGM
Under Rule 15 of the AIM Rules, the Proposed Merger is deemed to constitute a
disposal resulting in a fundamental change of business of the Company and
consequently requires the prior approval of shareholders of the Company of the
resolution to be proposed at an extraordinary general meeting of the Company. A
Circular is being posted to shareholders of the Company today for the purposes
of convening an extraordinary general meeting of the Company to be held at the
offices of Norton Rose LLP at 3 More Riverside, London SE1 2AQ at 10.30 a.m. on
3 April 2008, for the purpose of considering and if thought fit, passing an
ordinary resolution to approve the Proposed Merger, as required by Rule 15 of
the AIM Rules.
Enquiries:
Healthcare Enterprise Group + 44 (0)1925 898 200
Lyndon Gaborit, Executive Deputy Chairman
Numis Securities
Michael Meade +44 (0) 20 7260 1000
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
END
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