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Conditional offer to acquire 70% of certain of the operating subsidiaries of Imbalie by Cavi Brands (Pty) Ltd
IMBALIE BEAUTY LIMITED
"Imbalie” or “the Company” or “the Group”
(Incorporated in the Republic of South Africa)
(Registration number 2003/025374/06)
JSE code: ILE
ISIN: ZAE000165239
CONDITIONAL OFFER TO ACQUIRE 70% OF THE ORDINARY SHARE CAPITAL IN
CERTAIN OF THE OPERATING SUBSIDIARIES OF IMBALIE BY CAVI BRANDS
(PTY) LTD (“CAVI”) AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1 Introduction
1.1 Shareholders are referred to the cautionary announcement issued on 24 May 2017
and are advised that Imbalie has accepted a conditional offer from CAVI on 07 July
2017, which, if all conditions precedent are met, will result in CAVI acquiring 70% of
the ordinary shares in certain of the operating subsidiaries of Imbalie (“the shares”),
for a purchase consideration of R25 million (“the transaction”). The acquisition by
CAVI will comprise the greater part of the assets of Imbalie.
1.2 Given the impact that the transaction will have on Imbalie, Imbalie will make an
application to the JSE Limited (“JSE”) after the successful implementation of the
transaction to convert its classification to an Investment Holding Company.
1.3 In accordance with CAVI’s usual practice when acquiring businesses, the
management and team members of both CAVI and Imbalie, who were instrumental
in the past successes of these organisations, will remain unchanged.
2 Background to Imbalie
2.1 Imbalie is a franchisor, brand owner, service provider and an educator of beauty and
wellness offerings and products.
2.2 Imbalie has its own and franchise salon footprint (“professional salon footprint”) of
more than 150 beauty salons nationally through the following franchise salon chains:
Placecol Skin Care Clinics; Dream Nails Beauty Salons and Perfect 10 Nail and
Body Studios.
2.3 Imbalie has two established training academies, one in Woodmead and one in the
Western Cape that offer 34 modular training courses as the Group’s mission is to
improve and empower all. The Woodmead facility is SETA and ITEC accredited and
the Cape Town facility which was established in April 2017 is in the process of being
accredited.
3 Background to CAVI
3.1 CAVI was founded in 2005 and has grown to be a leading distributor and owner of
high quality and leading beauty and personal care brands in South Africa with routes
to market in the professional and retail industries.
3.2 CAVI subscribes to a philosophy of investment through strategically acquiring brands
and licences that support its focused growth strategy alongside a strong track record
in developing and growing iconic brands in Southern Africa.
3.3 CAVI employs approximately 600 permanent staff of which some 300 are beauty
consultants.
3.4 CAVI is a leading educator in the beauty and lifestyle categories, training more than
12 000 people per year, focusing on young talent, service excellence and leadership
development in support of its brands.
3.5 The CAVI group has a strong balance sheet and is able to fund the transaction
through available cash reserves.
4 Terms of the transaction
4.1 Subject to the conditions precedent being fulfilled, CAVI or a nominated subsidiary of
CAVI will acquire 70% of the ordinary share capital of each of the following Imbalie
subsidiaries (”the Business"):
4.1.1 Placecol Fresh Beauty (Pty) Ltd (Registration Number: 2002/003717/07);
4.1.2 Imbalie Beauty Training Academy (Pty) Ltd (Registration Number:
2003/013792/07);
4.1.3 Dream Nails Beauty (Pty) Ltd (Registration Number: 2004/016510/07);
4.1.4 Enjoy Beauty (Pty) Ltd (Registration Number: 2006/018410/07); and
4.1.5 Placecol Skin Care Clinic (Pty) Ltd (Registration Number: 2003/013709/07).
4.2 The basis of the conditional offer is that these companies comprise all of the
operating subsidiaries of Imbalie, other than Imbalie Innovation (Pty) Ltd, whose
assets are the property situated at 23 Saddle Drive, Woodmead Office Park, which
fall outside the transaction and are to be dealt with separately with the proceeds of
any sale accruing solely to Imbalie.
4.3 The purchase consideration of R25 million will be settled in cash.
4.4 The effective date of the transaction is envisaged to be during September 2017.
4.5 The transaction proceeds will be used to reduce debt, to improve working capital of
Imbalie and to look for other investment opportunities.
5 Rationale for the transaction
5.1 The rationale for the transaction is inter alia to:
- revitalise the premium professional skin care channel through a training and
investment program;
- strengthen the basket of high quality and leading beauty brands which are
available to Imbalie’s professional salon footprint of more than 150 outlets
(“Imbalie Outlets”), making the underlying beauty salons more desirable and
successful and increasing the trading density of the Imbalie Outlets.
- introduce Imbalie-owned brands into the CAVI sales channels;
- consolidate the sales, finance, logistics, IT, supply chain and contract
manufacturing capabilities of Imbalie with those of CAVI;
- build employment opportunities and support small enterprise development in
professional skin care; and
- leverage the Imbalie training infrastructure with CAVI’s training expertise and
volume and improve the standards and capability within the premium
professional skin care channel.
6 Conditions precedent to the transaction
6.1 The transaction is subject inter alia to the following conditions precedent:
- Successful conclusion of a due diligence by CAVI on Imbalie;
- Approval of the transaction by CAVI brand principals on terms acceptable to
CAVI;
- The issuing of a fairness opinion in terms of section 112(4) of the Companies
Act, 2008;
- Approval of the transaction by the shareholders of Imbalie in terms of the JSE
Listings Requirements as well as section 112 of the Companies Act, 2008;
- Approval of the transaction by the Competition Commission (if required); and
- Approval of the transaction by the JSE as well as the Take-Over Regulation
Panel (“TRP”).
7 Financial information in respect of the transaction
The net value of the assets (including shareholders’ loans) attributable to the
transaction was R41.9 million as at 28 February 2017. The loss attributable to the
net assets that are the subject of the transaction was R15.7 million for the year
ended 28 February 2017.
8 Categorisation of the transaction
The transaction is a Category 1 transaction in terms of the JSE Listings
Requirements and requires approval by a 75% majority of Imbalie’s shareholders.
9 Circular to shareholders
A circular to Imbalie shareholders containing details of the transaction and
incorporating a notice of general meeting of shareholders will, subject to approval by
the JSE and TRP, be mailed to shareholders within 60 days of this announcement or
within such longer period as the JSE may allow in the circumstances. Shareholders
will be notified once the transaction becomes unconditional.
10 Withdrawal of cautionary announcement
The cautionary announcement dated 24 May 2017 is hereby withdrawn and caution
is no longer required to be exercised by shareholders when dealing in their
securities.
Designated Adviser
Exchange Sponsors
Attorneys
Fluxmans Inc
Woodmead
7 July 2017
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