Friday 5th August 2016
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Vitaco Health Group will need more capital if it goes ahead with plans to expand its Auckland manufacturing and warehousing, which it says shareholders should be aware of in contemplating a A$313.7 million takeover bid from a Chinese-led consortium.
The ASX-listed food supplements maker has entered into a scheme of arrangement with drugmaker Shanghai Pharmaceuticals and private equity firm Primavera Capital which would see the buyers pay A$2.25 a share, including any final dividend declared when it reports annual earnings this month. That was 28 percent higher than the closing price on Wednesday before the deal was announced yesterday, although a more modest 7.1 percent premium to the A$2.10 initial public offering price when Vitaco listed last year. The shares closed at A$2.11 yesterday, gaining 20 percent after the deal was announced.
The takeover has the unanimous support of Vitaco's board, senior management and its shareholder Next Capital, which floated the company in September.
In recommending the offer, the company highlighted some of the headwinds facing the supplements maker, with earnings growth in 2017 expected to be "modest" due to regulatory uncertainty in China and the loss of an agency contract with New Zealand skincare maker Trilogy International, something it played down in February, while increased marketing and more workers in China would lift costs in the year.
"Shareholders should also note that Vitaco is in the preliminary stages of assessing opportunities to expand its manufacturing and warehousing footprint in Auckland which, if actioned, will require capital investment," it said.
Vitaco manufactures the bulk of its products at two facilities in Auckland, with the perceived quality of New Zealand and Australian supplements a selling point for international buyers in China, the UK, and South America.
Australian private equity firm Next Capital built up the food supplements firm in 2007 after buying Healtheries and Nutra-Life, taking it public last year. The funds raised went to repaying debt and giving the existing shareholders an exit opportunity.
The company now consists of the vitamins and supplements divisions, whose brands include Healtheries, Wagner and Nutra-Life, and the sports and active nutrition and health food segment, made up of Musashi, Balance, Bodytrim, Healtheries and Abundant Earth brands.
Shareholders are expected to vote on the deal in November with implementation seen happening in December. The transaction would need approval from Australia's Foreign Investment Review Board and New Zealand's Overseas Investment Office.
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