(Sharecast News) - Medical diagnostics specialist Omega has signed a conditional sale and purchase agreement with Accubio, a wholly-owned subsidiary of Orient Gene, for the sale of its diagnostic test kit manufacturing business and facility in Alva, Scotland.
The AIM-traded firm said the sale would be for £1m in cash, payable on completion.
It said the sale was conditional on the execution of a "comprehensive" transitional services agreement in line with the agreed principles, the consent of the landlord to assign the Alva lease, and Business Secretary Kwasi Kwarteng not issuing an intervention notice requiring a review of the Sale, in each case before 7 March.
The company said the manufacturing business was being sold as a going concern with around 109 full-time employees based in Alva transferring with the business, with no resultant redundancies.
It said the agreement also covered the sale of certain fixed assets, including plant and equipment, but not any government-funded equipment on site, as well as the assignment of the lease for the Alva site.
The transitional services agreement to be entered into would contain arrangements that address the ongoing requirements for the site to produce lateral flow tests (LFTs) for Omega, in particular the 'Visitect CD4 Advanced Disease Test' and the 'Visitect Covid-19 Antigen Test'.
Omega said the arrangements would cover a transitionary period to December.
In the meantime, it said it would consider a number of options for ongoing manufacture of the Visitect CD4 test, one of which would be to transfer manufacturing to Omega's planned new manufacturing site in Ely, Cambridgeshire.
In the longer-term, Omega said it was planning to move to a subcontract manufacturing model for its Visitect Covid-19 test, which was expected to "significantly reduce" manufacturing costs.
"Today's news is the first stage of a planned strategy to deliver on our stated objectives to see an increase in revenue across the group and to reduce losses," said chief executive officer Jag Grewal.
"We had previously highlighted our need to re-size our Covid LFT manufacturing capacity and it is hugely disappointing that having acted in good faith to establish UK manufacturing for government-issued COVID tests, we find that these tests are, in the main, sourced from China instead.
"The deal with Orient Gene allows the historical Alva site, which has been producing diagnostics products since September 2003, to continue to thrive, and importantly provides greater job security for the 109 employees who will be transferring to Accubio."
Grewal said the sale would "significantly reduce" the group's fixed cost base and eliminate a number of potential future liabilities, while generating funds for further investment and growth.
"The focus of the Omega team is on delivering significant growth in the profitable health and nutrition division, determining the best way to deliver shareholder value from our CD4 product, which is now building momentum, and executing on a subcontract production model for Covid-19."
At 1402 GMT, shares in Omega Diagnostics were down 16% at 6.09p.
