1st Feb 2006 07:01
Provalis PLC01 February 2006 Provalis plc Proposed disposal of certain assets of Provalis Healthcare for £10.5m and Boardchanges Provalis plc ("Provalis") has agreed to sell certain assets of ProvalisHealthcare Limited ("Provalis Healthcare"), its pharmaceutical division, toKogen Limited ("Kogen"), an independently managed pharmaceutical companyaffiliated to Galen Limited ("Galen") in Northern Ireland, for approximately£10.5 million. • The assets comprise certain contracts of Provalis Healthcare, the goodwill of Provalis Healthcare, the intellectual property rights relating to Provalis Healthcare's products and the stocks of Provalis Healthcare • Total consideration of £9.5 million, plus approximately £1.0 million for the stock of the products, payable in cash on Completion, before transaction costs of approximately £0.5 million • Net cash proceeds of approximately £10.0 million will be used primarily to repay the entire borrowings of the Group which are currently approximately £5.2 million • The Group will retain the infrastructure, employees and certain other working capital balances of Provalis Healthcare. The closure costs associated with these employees and infrastructure are expected to be approximately £1.0 million • The resulting net cash balance of approximately £3.8 million will allow Provalis to continue the resolution of the technical issues associated with in2it and allow Provalis to fully pursue all available options for the Medical Diagnostics division • The Disposal is conditional upon Shareholder approval which will be sought at an extraordinary general meeting ("EGM") to be convened shortly • Frank Harding will resign as both Chairman and Non-Executive Director of Provalis immediately after the EGM with Alan Aikman, currently a Non-Executive Director, assuming the role of Chairman • Peter Bream, Finance Director, will step down on 31 March 2006. Mark Keen, Director of Finance (Operations), a non-Board position, will assume overall responsibility for Provalis' finance functions Peter Woodford, Interim Chief Executive, said: "The disposal of Provalis Healthcare allows us to concentrate all our energieson the Medical Diagnostics division. This disposal provides us with a financialplatform from which the Group can address the technical issues associated within2it and allow time for us to pursue all options for optimising the value ofthe Medical Diagnostics division for shareholders" 1 February 2006 Enquiries: Provalis plc 01244 288 888Peter Woodford, Interim Chief ExecutivePeter Bream, Finance Director College Hill 020 7457 2020Adrian Duffield / Corinna Dorward N M Rothschild & Sons Limited 0113 200 1900David Forbes N M Rothschild & Sons Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for Provalisand no one else in connection with the Disposal and will not be responsible toanyone other than Provalis for providing the protections afforded to itscustomers or for giving advice in relation to the Disposal. ------------------------------------------------------- Proposed disposal of certain assets of Provalis Healthcare for £10.5m Introduction The Board announces today that it has agreed to sell certain assets of ProvalisHealthcare to Kogen, an independently managed pharmaceutical company affiliatedto Galen in Northern Ireland, for approximately £10.5 million. The assetscomprise certain contracts of Provalis Healthcare, the goodwill of ProvalisHealthcare, the intellectual property rights relating to Provalis Healthcare'sproducts and the stocks of Provalis Healthcare. Background to and reasons for the Disposal The Pharmaceuticals division of the Group (composed solely of ProvalisHealthcare) sells and markets its own and third party branded prescriptionmedicines in the UK and Ireland to General Practitioners and hospitals throughits regionally managed sales force. The division's principal product isDiclomax, a medicine for use in the treatment of musculo skeletal disorders andit also sells products in the areas of osteoporosis, migraine and dermatology. The Group's other division, Medical Diagnostics, develops medical diagnosticproducts for chronic disease management for sale to world markets. Thatdivision's principal products are in2it and Glycosal, both being diabetesmanagement products. On 19 October 2005 Provalis announced its preliminary results for the year ended30 June 2005. That announcement referred to a strategic review aimed atoptimising the commercialisation of all the Group's products and achieving therepayment or replacement of bank funding. One of the options being consideredwas the possible sale of assets to realise value for the Group. With regard tothe Medical Diagnostics business, it was still too early at that time to predictfurther sales of in2it and it was acknowledged that more permanent funding wouldbe required in due course. On 16 November 2005 the Company announced an update to its strategic reviewconfirming that the Board had decided to examine the possibility of selling thePharmaceuticals division or certain of its assets and that the Board hadreceived indicative offers which were then being progressed. The Board also noted that sales of in2it into the US market continued to bedisappointing and significant sales were unlikely to be achieved until certaintechnical issues were resolved. In the last two months, Provalis has identifiedthe causes of these technical issues and developed plans for their resolution.However, these issues do need resolving before commercial exploitation of in2itcan be achieved and accordingly meaningful sales of in2it cannot be expected fora number of months. The Board has been advised by two firms of stockbrokers that an equity issuethrough the market is unlikely to be feasible. The Board has concluded that, inthe absence of further equity funding and given that borrowing facilities areunlikely to be available whilst the Group is loss making, Provalis is not in aposition on its own to fully exploit the opportunities that in2it presents andthat accordingly a number of options for the Medical Diagnostics division shouldbe considered. Assuming that the Disposal proceeds as expected the Board willcontinue to explore all options available to the Medical Diagnostics division,including a joint venture, licensing or partnering agreement with a third partyas well as the possible sale of the business, assets or the associatedintellectual property of the products. The Board is in discussions with a numberof interested parties regarding the possible sale of the business or assets ofthe Medical Diagnostics division. These discussions are at an early stage. Inthe event the business or the assets of the Medical Diagnostics division aresold, the transaction would be conditional on Shareholder approval. Information on Provalis Healthcare In the year ended 30 June 2005 Provalis Healthcare generated turnover of £9.1million (2004: £11.4 million) and reported a loss before taxation of £0.7million (2004: profit of £1.6 million). The net assets of Provalis Healthcare asat 30 June 2005 were £2.9 million. In announcing those results, the Boardreported that sales were lower than the previous year. This was due to acombination of ceasing to sell the Dr Falk range of products in December 2004,decreasing its UK sales prices for the remainder of its products by an averageof 7 per cent. as a result of the implementation of the revised UKPharmaceuticals Pricing Regulation Scheme in January 2005 and a decline in salesof Diclomax as a result of general market concerns about all NSAIDs followingthe withdrawal of another NSAID in September 2004 compounded by the introductionto the UK market of a new generic competitor product in October 2004. Thesefactors have continued to affect the business throughout the first half and intothe second half of the current financial year. Principal terms of the Disposal Under the terms of the Sale Deed, Provalis Healthcare has conditionally agreedto dispose of certain contracts of Provalis Healthcare, the goodwill of ProvalisHealthcare and the intellectual property rights relating to ProvalisHealthcare's products for a gross consideration of £9.5 million payable in cashon Completion. In addition, the stocks of Provalis Healthcare will be sold toKogen at book value of approximately £1.0 million. The Group will retain approximately £0.2 million of current assets andsubstantially all of the infrastructure, including all employees, of ProvalisHealthcare, as they are not part of the Disposal. The closure costs associatedwith the employees and infrastructure which do not form part of the Disposalwill be funded from the Gross Proceeds and are expected to be incurredimmediately following Completion at an associated estimated cost of £1.0million. Completion of the Sale Deed is conditional upon the Disposal being approved byShareholders at the EGM. Financial effects of the Disposal The book value of the gross assets to be disposed of was £10.7 million at 30June 2005. If the Disposal had been completed at 30 June 2005 then takingaccount of the expenses relating to the Disposal including the associatedre-organisation costs, the net assets of the Continuing Group would have reducedby approximately £1.7 million. The Board believes that the Disposal will reducethe Group's loss per share. (This statement should not be interpreted to meanthe Company's future losses per share following the Disposal will necessarily beless than or equal to the Company's historical losses per share.) Further details of the Disposal will be set out in the Circular. Use of proceeds The net cash proceeds of approximately £10.0 million from the Disposal will beused to repay the entire borrowings of the Group which are currentlyapproximately £5.2 million. In addition, the net proceeds will in part beutilised to fund the costs associated with the closure of the ProvalisHealthcare infrastructure retained by the Group which are estimated at £1.0million. The resulting net cash balance of approximately £3.8 million willprovide funds to continue the resolution of the technical issues associated within2it and allow Provalis to fully pursue all options available for the MedicalDiagnostics division. Current trading and prospects As stated earlier, meaningful sales of in2it within the Medical Diagnosticsdivision are unlikely for a number of months and the Company's efforts arefocused on resolving the technical difficulties that have arisen. The precisetiming of the resumption of sales of in2it will have a material effect on theContinuing Group's prospects for the current financial year. Management Following the Disposal, Frank Harding will resign as both Chairman and Directorafter the EGM and Alan Aikman, currently a Non-Executive Director, will assumethe role of Chairman. It is intended that Peter Woodford will continue in hisrole as interim Chief Executive. In addition, Peter Bream, the Group's Finance Director, will step down as aDirector on 31 March 2006. Mark Keen, the current Director of Finance(Operations), which is not a main board position, will remain in his currentpost which, following Peter Bream's departure, will include overallresponsibility for the finance function of the Group. Working Capital If the Disposal is approved, the Company is of the opinion that, after takinginto account the net proceeds of the Disposal, the Continuing Group will havesufficient working capital for its present requirements, that is, for at least12 months from the date of publication of the Circular. The Group's currentborrowing facilities are due to be repaid on 28 February 2006 and consequentlyif the Disposal is not approved by Shareholders at the EGM, the Board believesthat the Group would have insufficient working capital for its presentrequirements without other sources of funding being available which theDirectors believe to be unlikely. Accordingly the Board believes that theDisposal is critical to the survival of the Group and currently represents themost viable route to achieving a financial platform from which the Group canaddress the technical issues associated with in2it and allow time for the Groupto pursue all options for optimising the value of the Medical Diagnosticsdivision for Shareholders. DEFINITIONS The following definitions apply throughout this announcement unless the contextotherwise requires: "Circular" the Circular to Shareholders setting out details of the Disposal; "Company" Provalis plc; "Completion" completion of the disposal, which is expected to take place on or around 20 February 2006; "Continuing Group" the Provalis Group following Completion; "Directors" or the directors of the Company;"Board" "Disposal" the proposed disposal of certain assets of Provalis Healthcare Limited by Provalis under the terms of the Sale Deed as described in the Circular to Shareholders; "Glycosal" an instrument with disposable cartridges which carries out a quantitative test for HbA1c for use in the long term management of diabetes; "Gross Proceeds" the total cash consideration received by Provalis from Kogen in relation to the Disposal; "Group" the Company and its subsidiary undertakings from time to time; "in2it" a second generation instrument with disposable cartridges which carries out a quantitative test for HbA1c for use in the long term management of diabetes; "Medical Diagnostics" the medical diagnostics division of the Group; "N M Rothschild & N M Rothschild & Sons Limited, which is authorized by the Financial Services Authority;Sons Limited" "NSAID" Non-Steroidal Anti-Inflammatory Drug; "Ordinary Shares" ordinary shares of 1p each in nominal value in the share capital of the Provalis; "Registrars" Capita Registrars plc; "Sale Deed" the deed dated 31 January 2006 entered into between Provalis Healthcare, Kogen and Provalis under which Provalis Healthcare shall sell certain of its assets to Kogen; "Shareholders" holders of Ordinary Shares in the share capital of the Company; "UK" the United Kingdom of Great Britain and Northern Ireland; This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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