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Transaction to acquire all the shares in and claims against Curves Africa
Imbalie Beauty Limited
(Registration number 2003/025374/06)
JSE Share code: ILE ISIN: ZAE000165239
(“Imbalie Beauty” or “the Company” or “the Group”)
TRANSACTION TO ACQUIRE ALL THE SHARES IN AND CLAIMS AGAINST, CONSTANTIA
CORPORATION LIMITED, FRANSCHOEK FRANCHISING SERVICES (PTY) LIMITED, KALEIDOSCOPE
BRANDING CC AND KIMOSCAPE (PTY) LIMITED (“CURVES AFRICA”).
1. INTRODUCTION
Shareholders are advised that Imbalie Beauty has entered into Heads of Agreement on 3 November
2015 to acquire Curves Africa from Pembrook Properties Limited and Unakite Investments Limited
(“the Sellers”) (together “the transaction”).
2. RATIONALE FOR THE TRANSACTION
Curves Africa is the largest fitness and wellness group for women in Africa. Curves Africa has 87
franchised clubs across South Africa and has 9 franchised clubs in Nigeria, Botswana, Namibia,
Zambia and Zimbabwe. The transaction will give Imbalie Beauty strategic access into the fitness and
wellness arena in South Africa and Africa. The market trend is for consumers to live longer and to look
better, with wellness and beauty driving this category. Imbalie Beauty identified wellness as an
important growth area for consumers.
Imbalie Beauty is a franchisor, distributor and service provider of beauty offerings and products.
Imbalie Beauty has both its own distribution footprint and a franchised distribution footprint, which
together total 160 beauty salons nationally. In addition, Imbalie Beauty is the owner and the exclusive
product distributor of various skin care and make-up brands.
Imbalie Beauty is a multiple brand franchise owner that owns the Placecol, Dream Nails Beauty and
Perfect 10 franchise salon brands. The Curves Africa business model is considered to be
complementary to the existing Imbalie Beauty franchise model and the salon, fitness and wellness
brands will enhance and complement each other in the group.
Imbalie Beauty’s vision is to be the largest and most desirable beauty and wellness franchise group in
South Africa. The visions of Curves Africa and Imbalie Beauty are aligned. The transaction will firmly
entrench Imbalie Beauty in its position as the largest and most desirable beauty and wellness group
with more than 250 franchised and owned outlets in Africa.
Curves Africa is about fitness, health, and wellness, moving away from disease. Curves is about
gaining strength and losing weight. Curves is about strengthening women, which is aligned to the
mission of Imbalie Beauty which is to make a positive change in the world through self-improvement
and self-empowerment and by increasing the self-esteem of its customers.
The Curves Africa brand is complementary to the Imbalie Beauty offering and the transaction will be
earnings enhancing with the following benefits:
- Supports Imbalie Beauty’s multiple brand strategy;
- Critical mass, volume and scalability for the enlarged Imbalie Beauty group;
- Sharing of reciprocal databases and footprints;
- No cannibalisation between Curves Africa and existing brands;
- Cross selling opportunities between brands like gift cards, loyalty programs and subscriptions;
- Grow each brand in terms of gap analysis to scientifically support growth;
- Strengthening of management team;
- Accredited training through the Imbalie Training Academy;
- Access for Curves Africa to dedicated marketing, social media and graphic design specialists;
- More compelling offering versus the competitors; and
- Reach out into Africa and beyond.
3. BACKGROUND OF CURVES
Founders Gary and Diane Heavin, committed veterans of the fitness and advertising industries, are
considered the innovators of the express fitness phenomenon that has made exercise available to
more than 4 million women worldwide. They share a passion for and commitment to women's health
and fitness. The Heavins opened the first Curves in 1992 in Harlingen, Texas.
Their innovative, 30-minute fitness concept combined strength training and sustained cardiovascular
activity through safe and effective hydraulic resistance. The club was an overnight success, as it gave
women a supportive and comfortable atmosphere in which to workout. In fact, the company's unofficial
motto became "no makeup, no men, and no mirrors".
Curves opened clubs at an astronomical rate, sometimes more than doubling its number of locations
from year to year. This was all done by word of mouth until Curves launched its award-winning
national advertising campaign in 2003. What took McDonalds 25 years and Subway 26 years to do -
open in 7 000 locations - Curves did in under a decade. Accolade after accolade ensued: Fastest
growing franchise in history; World's largest fitness franchise; New York Times bestseller (Curves,
Permanent Results without Permanent Dieting); and No. 1 Fitness Franchise.
Today, Curves has nearly 10 000 clubs in more than 85 countries serving more than 4 million
members.
The very first Curves in South Africa opened in Pietermaritzburg, KwaZulu-Natal in September 2005.
4. TERMS AND CONDITIONS OF THE TRANSACTION
4.1 In terms of the Heads of Agreement Imbalie Beauty will acquire 100% of Curves Africa from
the Sellers.
4.2 The purchase price will be payable in cash, or cash and Imbalie Beauty shares as follows:
4.2.1 Imbalie Beauty will pay R14 000 000 (fourteen million Rand) (“initial payment”) to the
Sellers on the conclusion of all the suspensive conditions set out in paragraph 4.3
below.
4.2.2 Imbalie Beauty will make two additional payments to the sellers based on the following
conditions and subject to a maximum purchase price of R20 000 000 (twenty million
Rand):
4.2.2.1 First additional payment of R4 000 000 (four million Rand) will be based on an
average profit before tax exceeding R3 100 000 (three million one hundred
thousand Rand) for the three years ending February 2019.
4.2.2.2 Second additional payment of R2 000 000 (two million Rand) will be based on a
sliding scale if the average profit before tax of Curves Africa exceeds
R4 650 000 (four million six hundred and fifty thousand Rand) for the three
years ending February 2019. The Sellers will receive R1 (one Rand) for every
R1 (one Rand) that the average profit before tax of Curves Africa for the three
years ending February 2019 exceeds R4 650 000 (four million six hundred and
fifty thousand Rand). This payment will be capped at R2 000 000 (two million
Rand).
4.2.3 The purchase price including the first and second additional payments will be settled in
cash, or a combination of cash and shares, and paid on the applicable dates.
4.3 The transaction is subject to fulfilment of the following conditions precedent by no later than 15
January 2016:
4.3.1 entering into a new Master Franchise Agreement with Curves International on terms
and conditions acceptable to Imbalie Beauty;
4.3.2 minimum net asset value of R4 500 000 (four million five hundred thousand Rand) of
Curves Africa on the effective date;
4.3.3 entering into final legal agreements, which will contain standard warranties and
indemnities for a transaction of this nature and will be subject to approval of the Imbalie
Beauty Board of Directors;
4.3.4 any regulatory approvals, including Competition Commission approval, that might be
required;
4.3.5 certain key employees of Curves Africa signing a restraint of trade and/or employment
contracts in terms of which they agree to be employed by Imbalie Beauty for a period
of three years and a restraint for a three year period after terminating employment;
4.3.6 the Sellers will be restrained for a period of five years;
4.3.7 successful conclusion of a due diligence on Curves Africa; and
4.3.8 to the extent necessary, the written consent of third parties to material contracts.
4.4 The effective date will be the first day of the month following the month in which all conditions
precedent have been fulfilled, or such later date as might be agreed between the parties.
5. FINANCIAL INFORMATION IN RESPECT OF THE ACQUISITION
The value of the net assets of Curves Africa was R10.7 million as at 28 February 2015 and the profits
before taxation attributable to these net assets for the period ending 28 February 2015 were R3.7
million.
6. CATEGORISATION OF THE TRANSACTION
The transaction is categorized, in terms of the JSE Listings Requirements, as a Category 2
transaction and does not require shareholders’ approval.
Designated Advisor
Exchange Sponsors
Legal Advisor
Bouwers Inc
4 November 2015
Johannesburg
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