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SKW - Skinwell - Proposed Name Change; Acquisition of the Perfect 10 Franchise
Business from A&V Beauty Products CC; and General Issue of Shares for Cash.
SKINWELL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2003/025374/06)
JSE code: SKW
ISIN: ZAE000135893
("Skinwell" or "the company" or "the group")
* PROPOSED NAME CHANGE;
* ACQUISITION OF THE PERFECT 10 FRANCHISE BUSINESS FROM A&V BEAUTY PRODUCTS
CC; and
* GENERAL ISSUE OF SHARES FOR CASH.
1. Proposed name change, vision and mission
1.1 Skinwell proposes changing its name to Imbalie Beauty to better reflect its
status as a franchisor of multiple branded beauty salons with service and
product offerings in skin care, nail care, hair care and other beauty
offerings.
1.2 The word "Imbalie" has been derived from the Zulu word for flower, which is
appropriately symbolic of our underlying salons.
1.3 The group will continue to be a multiple brand owner, owning Placecol skin
care clinics, Dreamnails Beauty salons, World of Beauty salons and
following the Perfect 10 transaction detailed below, Perfect 10 studios.
1.4 Our vision is to be the largest and most desirable beauty franchise company
and our mission is to make a positive change in the world through self-
improvement, self-empowerment and increasing the self-esteem of our
customers.
2. The Perfect 10 transaction
2.1 Shareholders are advised that, further to the cautionary announcements
dated 12 December 2011 and 26 January 2012, the company has, through its
wholly-owned subsidiary Enjoy Beauty (Pty) Limited ("the purchaser")
entered into a sale of business agreement with A&V Beauty Products CC,
trading as Perfect 10 ("the seller"), to acquire the business of operating
the Perfect 10 franchises for a purchase consideration of R14,35 million
("the Perfect 10 transaction").
2.2 The effective date of the acquisition is 1 March 2012, or the first
business day of the month following the date upon which the last of the
suspensive conditions is fulfilled or waived, whichever is later ("the
effective date").
2.3 The agreement contains warranties normal for an acquisition of this nature
and key management members of Perfect 10 have entered into a restraint of
trade agreement with the purchaser.
3 Background to Perfect 10
3.1 Perfect 10 was launched in 2003 as a branded "price competitive" modern
nail and beauty franchise concept and has grown since then to number almost
55 nail and beauty studios around South Africa, each one individually
designed to suit the franchisees` requirements.
3.2 Perfect 10 prides itself on offering its customers products keeping with
the latest international trends, using only the very best quality products.
3.3 Key facts regarding Perfect 10 studios include:
- second largest beauty salon franchise group in South Africa;
- well respected by independent suppliers; and
- strong presence in KwaZulu-Natal.
3.4 The Perfect 10 management team will provide assistance to the company`s
management team to ensure the successful integration of the Perfect 10
transaction.
4. Rationale for the acquisition
4.1 The rationale for the Perfect 10 transaction is inter alia as follows:
- the acquisition of Perfect 10 will immediately elevate the group to
the largest and leading beauty franchise company in South Africa with
almost 150 beauty salons nationally;
- to take advantage of the synergies between the current salons in the
group and Perfect 10 through on-going training, marketing and
advertising;
- being able to leverage off national gift and loyalty card systems;
- to provide critical mass enabling the group to negotiate better fee
structures from suppliers, financial institutions and landlords;
- the acquisition is expected to be earnings-enhancing to the company
from the first year of consolidation.
5. Conditions precedent to the Perfect 10 transaction
The Perfect 10 transaction is unconditional.
6. Funding of transaction and general issue of shares for cash
6.1 The company has completed a general issue of shares for cash whereby 109
375 000 ordinary shares have been placed with a number of independent
public shareholders at a price of 16 cents per share raising R17,5 million
("the general issue for cash"). The price for the general issue for cash
was determined by the directors on 28 February 2012 based on a discount of
6% on the weighted average price of 16.96 cents for the 30-day period up to
and including 27 February 2012. The general issue for cash increases the
number of shares in issue from 236 172 773 ordinary shares to 345 547 773
ordinary shares. The general issue for cash was made in terms of the
general authority to issue shares for cash granted to the board by
shareholders at the annual general meeting held on 28 September 2011.
6.2 The company has also entered into a loan agreement, whereby the company
secured a R5 million three year term loan at an interest cost of 8% per
annum.
6.3 The total amount raised of R22,5 million will be utilised to settle the
purchase consideration, repayment of other long term liabilities and to
strengthen the company`s balance sheet.
7. Financial effects
The unaudited pro forma financial effects, for which the directors are
responsible, are provided for illustrative purposes only to show the effect
of the Perfect 10 transaction and the general issue for cash on the
earnings and headline earnings per share as if the Perfect 10 transaction
and the general issue for cash had taken effect on 1 March 2011 and on the
net asset value and net tangible asset value per share as if the
Acquisition had taken effect on 31 August 2011. Because of their nature,
the unaudited pro forma financial effects may not give a fair presentation
of Skinwell`s financial position and performance. The unaudited pro forma
financial effects have been compiled from the reviewed consolidated
financial statements of Skinwell for the six month ended 31 August 2011 and
are presented in a manner consistent with the format and accounting
policies adopted by Skinwell and have been adjusted as described in the
notes below.
Before After Change (%) Note
Basic earnings per share (cents) 0.50 0.85 70%
Headline earnings per share (cents) 0.50 0.85 70%
Net asset value per share (cents) 8.7 11.0 26%
Tangible net asset value per share
(cents) 5.7 5.0 (12%)
Shares in issue (`000) 236 173 345 548
Weighted average number of
shares in issue (`000) 236 173 290 860
Notes:
1. The "Before" column reflects the reviewed consolidated results of
Skinwell for the six months ended 31 August 2011.
2. The "After" column reflects what the results would have been had the
Perfect 10 acquisition been effective for the full six-month period
ended 31 August 2011 for income statement purposes, and as at 31
August 2011 for balance sheet purposes.
3. Shareholders should note that the results of Perfect 10 have been
extracted from the unaudited management accounts relating to the
royalty payments made in terms of the franchise business. Skinwell,
however, has satisfied itself with the quality of the royalty payments
and related costs for this period.
4. The net assets of Perfect 10 that are the subject of the Perfect 10
transaction amounts to R14,35 million and the attributable earnings
amount to R1,2 million for the six months ended 31 December 2011.
5. It has been assumed that the cash proceeds from the general issue for
cash and the associated loan raised will be utilised to settle the
purchase consideration in respect of the Perfect 10 transaction. Cash
raised in excess of this will be utilised to settle borrowings that
currently attract interest at 9% per annum.
6. Tax has been provided for using a rate of 28%.
8. Circular to shareholders
A circular related to the proposed change of name will be posted to
shareholders in due course.
9. Withdrawal of cautionary announcement
Skinwell shareholders are advised that the cautionary announcement which
was last renewed on 26 January 2012 is hereby withdrawn.
Designated Adviser
Grindrod Bank Limited
Attorneys to Skinwell Holdings Limited
Roodt Inc.
Attorneys to A & V Beauty Products CC
Bowman Gilfillan
Johannesburg
6 March 2012
Date: 06/03/2012 09:46:01 Supplied by www.sharenet.co.za
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