Proservice Bldg Regulatory News (PRO)

7 Aug 2006 08:48

Provalis PLC07 August 2006 7 August 2006 Provalis plc Proposed disposal of the Diagnostics business and proposed Members' VoluntaryLiquidation Provalis plc ("Provalis", LSE: PRO) has agreed to sell its medical diagnosticsbusiness for effective consideration of £1.6 million through the sale of theentire issued share capital of its subsidiary, PB Diagnostics Limited toBio-Metrics (U.K.) Limited, a subsidiary of Bio-Rad Laboratories, Inc., subjectto shareholder approval. Following the completion of the sale of the assets of its pharmaceuticalbusiness, Provalis Healthcare, on 20 February 2006, the Company has continued tofocus on resolving the technical issues relating to the in2it product andexploring the commercial options available for this product, as outlined in theinterim results statement on 7 March 2006. The Company has made good progressin resolving the technical issues associated with in2it but does not have theresources to re-launch the product and maximise value through the exploitationof the product, especially in the US market. The Board believes the terms ofthe Disposal represent the most viable option for the Group to obtain value fromthe Medical Diagnostics business. Conditional upon completion of the Disposal and also subject to shareholderapproval, the Directors propose placing the Company into a members' voluntaryliquidation and cancelling the Company's listing of ordinary Shares on theOfficial List. The Directors, having discussed the matter with the Liquidators, expect that, inaggregate, an amount of approximately £1.4 million will be available fordistribution to shareholders. This represents approximately 0.4 pence perordinary share. No distribution to shareholders under the Liquidation will takeplace before 1 August 2007. Following the extraordinary general meeting to approve the Members' VoluntaryLiquidation, Peter Woodford will resign as Interim Chief Executive, Alan Aikmanwill resign as Non-Executive Chairman and Lee Greenbury will resign as directorand company secretary of the Company. Full details of the Disposal and Members' Voluntary Liquidation are set out inthe circular to shareholders, which will be posted to shareholders in the nearfuture. Dr Alan Aikman, Non-Executive Chairman, said: "The executive team has worked very hard to achieve this outcome in difficultcircumstances. Having explored a number of options including partneringarrangements and the possible sale of individual products, we believe that theDisposal represents the best option to obtain value for the medical diagnosticsbusiness and to secure the best result for shareholders as well as employmentfor the vast majority of the Group's employees." Enquiries: Provalis plcPeter Woodford / Lee Greenbury 01244 288 888 College HillAdrian Duffield / Corinna Dorward 020 7457 2020 N M Rothschild & Sons Limited David Forbes 0113 200 1900 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 the medical diagnostics business and proposed Members'Voluntary Liquidation Introduction The Board has agreed to sell its Medical Diagnostics business through the saleof the entire issued share capital of PB Diagnostics to Bio-Metrics for cashconsideration of £1 plus the procurement of the repayment of any amounts owingby PB Diagnostics to Provalis UK. The amount owed by PB Diagnostics to ProvalisUK as at 4 August 2006 was approximately £1.6 million. On 4 August 2006 Provalis reorganised its Medical Diagnostics business, underwhich the assets of Provalis Diagnostics, comprising the benefit of certaincontracts, a lease of the Premises, certain fixtures and equipment, theintellectual property rights relating to the Products, the stock of the Productsheld by Provalis Diagnostics and certain liabilities relating to employees andunder certain contracts, were transferred to PB Diagnostics. Background to and reasons for the Disposal On 19 October 2005, Provalis announced a strategic review aimed at optimisingthe commercialisation of all the Group's products and achieving the repayment orreplacement of bank funding. One of the options being considered, at that time,was 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, topredict further sales of in2it and it was acknowledged that more permanentfunding would be required in due course. On 1 February 2006, the Company announced the sale of the Group's pharmaceuticalbusiness, Provalis Healthcare, for a total consideration of approximately £10.5million. The sale of these assets, approved by the Company at an extraordinarygeneral meeting on 20 February 2006, allowed the Group to focus on maximisingthe value of the Medical Diagnostics business. Following the sale of the pharmaceutical business, the Company has focused onresolving the technical issues relating to in2it and exploring the optionsavailable to commercially exploit this product, as outlined in the interimresults statement on 7 March 2006. The Company has made good progress in resolving the technical issues associatedwith in2it but does not have the resources to re-launch the product and maximisevalue through the commercial exploitation of the product, especially in the USmarket. Consequently, the Company has explored a number of options regardingpartnering arrangements and the possible sale of the in2it product. The Board has considered these options thoroughly and believes that the Disposalrepresents the most viable option for the Group to obtain value from its MedicalDiagnostics business and, in particular, the in2it product. Information on Provalis Diagnostics Following the transfer on 4 August 2006 of the Provalis Diagnostics businessinto PB Diagnostics, the operations of PB Diagnostics reflect the underlyingperformance and assets of Provalis Diagnostics. In the year ended 30 June 2005Provalis Diagnostics generated turnover of £1.3 million (2004: £1.4 million) andreported a loss before taxation of £5.5 million (2004: loss of £3.5 million).The net liabilities of Provalis Diagnostics as at 30 June 2005 were £25.7million (2004: £20.5 million). Principal terms of the Disposal Under the terms of the Disposal, Provalis UK has conditionally agreed to disposeof the entire issued share capital of PB Diagnostics. The cash consideration payable by Bio-Metrics to Provalis UK at Completion is£1. Bio-Metrics has also agreed to procure the repayment of any amounts owingby PB Diagnostics to Provalis UK. The amount owed by PB Diagnostics to ProvalisUK at 4 August 2006 was approximately £1.6 million. The Disposal is conditional upon approval by shareholders at an ExtraordinaryGeneral Meeting on or before 14 September 2006. If this condition has not beenfulfilled before 14 September 2006 Provalis UK is liable to pay Bio-Metrics asum equal to 0.99 per cent. of the market capitalisation of Provalis at close oftrading on 4 August 2006. Financial effects of the Disposal The book value of the gross assets of PB Diagnostics to be disposed of is £2.8million. As a result of the Disposal, and after taking account of the expensesrelating to the Disposal, the unaudited net assets of the Continuing Group areexpected to decrease by approximately £1.8 million on Completion. The net proceeds from the Disposal are less than the net asset value of theassets being sold. However, the Directors have taken into account the factthat: (i) 33 of the Group's 40 employees will have transferred out of theGroup on Completion, thus removing from Provalis any employee relatedliabilities associated with those employees; and (ii) the Premises will have transferred out of the Group on Completion,thus removing any further lease obligations and closure costs. The Directors believe that removing these liabilities is important in preservingvalue for shareholders, which will be returned to shareholders through theMembers' Voluntary Liquidation. In the absence of the Members' Voluntary Liquidation, the Directors believe thatthe Disposal would be earnings enhancing in the first full year followingCompletion based on accounting policies currently in use being appliedconsistently. (This statement should not be interpreted to mean that futureearnings per share of Provalis following Completion would necessarily match orexceed the historical earnings per share of Provalis. For these purposes,earnings per share is measured before goodwill amortisation and exceptionalitems.) Use of proceeds The net cash proceeds of approximately £1.3 million from the Disposal (aftertransaction costs of approximately £0.3 million) will be placed on deposit,along with the remaining cash of the Group, which the Directors estimate will be£1.7 million on Completion. This will be used to discharge all known actual andcontingent liabilities with the resulting cash balance to be returned toshareholders through the Members' Voluntary Liquidation. Members' Voluntary Liquidation The Directors believe that the Members' Voluntary Liquidation will enable thenet cash in the Company, following Completion, and after taking into account allknown actual and contingent liabilities, to be returned to shareholders in themost cost effective manner. If shareholders approve the proposals, the Liquidators, after paying orproviding for all known actual and contingent liabilities of the Company, willdistribute the Company's remaining cash, including the net proceeds from theDisposal, to shareholders. The Directors, having discussed the matter with theLiquidators, expect that, in aggregate, an amount of approximately £1.4 millionwill be available for distribution to shareholders. This representsapproximately 0.4 pence per ordinary share. As a consequence of the warranties provided to Kogen Limited on the sale ofProvalis Healthcare, as set out on page 11 of the circular to shareholders dated1 February 2006, no distribution to shareholders under the Liquidation will takeplace before 1 August 2007. Consequently, the Board expects that a first andfinal cash distribution of approximately 0.4 pence per ordinary share will bepayable by cheque to shareholders as soon as possible following 1 August 2007. The Members' Voluntary Liquidation will not commence if the Disposal does nottake place. The Members' Voluntary Liquidation is conditional upon shareholderapproval, which will be sought at a second Extraordinary General Meeting. Theresolution to approve the Members' Voluntary Liquidation will be a specialresolution, which means that it will require approval of more than 75 per cent.of those persons who, being eligible to do so, vote in person or by proxy atthat meeting. If approved by special resolution of shareholders, the Members'Voluntary Liquidation will commence as soon as possible following that meeting. If shareholders approve the resolution to approve the Disposal, but not thatapproving the Members' Voluntary Liquidation, the Board will proceed withCompletion and review its strategy in respect of alternative means by whichcapital can be returned to shareholders. Current trading and prospects As stated above, since the announcement of the interim results, the Group hasmade good progress in resolving the technical issues associated with in2it.However, during July, a problem with a raw material resulted in the return of asmall number of batches of Glycosal, with a loss of sales revenue ofapproximately £150,000. If the resolution approving the Disposal is passed by Shareholders, but not theresolutions approving the Members' Voluntary Liquidation, the Board will proceedwith Completion. Following the Disposal, Provalis will have no tradingactivities but will retain certain actual and contingent liabilities and cash.The Continuing Group's only income will be interest receivable on its cashbalances and this interest will not cover the Group's ongoing running costsalthough these will be much reduced. In such circumstances, the Board willreview its strategy in respect of alternative means by which capital can bereturned to shareholders. Management Following approval of the Members' Voluntary Liquidation, Peter Woodford willresign as Interim Chief Executive, Alan Aikman will resign as Non-ExecutiveChairman and Lee Greenbury will resign as director and company secretary of theCompany. DEFINITIONS The following definitions apply throughout this announcement unless the contextotherwise requires: "Bio-Metrics" Bio-Metrics (U.K.) Limited, a subsidiary of Bio-Rad Laboratories, Inc.; "Completion" completion of the Disposal; "Continuing Group" the Group following Completion; "Disposal" the proposed disposal of the entire share capital of PB Diagnostics; "Group" the Company and its subsidiary undertakings as defined in the Act; "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;"Kogen Limited" Kogen Limited, an independently managed pharmaceutical company affiliated to Galen Limited in Northern Ireland "Members' Voluntary Liquidation" or " the proposed members' voluntary liquidation of Provalis asLiquidation" described in this announcement; "Liquidators" Phillip Sykes and Jeremy Willmont of Moore Stephens LLP, Chartered Accountants, proposed to be appointed under the Members' Voluntary Liquidation; "Medical Diagnostics" the medical diagnostics business of the Group; "PB Diagnostics" PB Diagnostics Limited; "Premises" Unit 37, Deeside Industrial Park, Deeside, Flintshire; "Products" Helisal, Glycosal, Osteosal and in2it; "Provalis" or the "Company" Provalis plc; "Provalis Diagnostics" Provalis Diagnostics Limited; "Provalis Healthcare" Provalis Healthcare Limited; "Provalis UK" Provalis UK Limited. This information is provided by RNS The company news service from the London Stock Exchange