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Pharmacybrands to lift directors' fees, introduce dividend reinvestment

Friday 6th July 2012

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Pharmacybrands, the retail pharmacy and medical centre company, will ask shareholders to approve a 22 percent hike in its pool for directors' fees and sign off on the implementation of a dividend reinvestment plan at next month's annual meeting.

The maximum aggregate remuneration for the Auckland-based company's board will rise to $380,000 from $310,000 taking effect from April of this year if shareholders approve the resolution.

Pharmacybrands' directors haven't had the pool raised since 2005, and the proposal reflects increases by similar-sized listed companies. "The company wishes to offer competitive fees in order to attract and retain the highest quality directors," it said in its notice of annual meeting.

Pharmacybrands almost doubled annual profit to $9.9 million in the 12 months ended March 31 after it acquired the Radius pharmacy and medical business last year. At the time, it announced a 3.5 cents-per-share dividend and said it will offer a dividend reinvestment plan.

The reinvestment plan, which would let shareholders forego a cash return in favour of receiving more shares, needs investor approval to let majority shareholders Cape Healthcare and LPL Trustee participate without breaching Takeovers Code requirements. Cape Healthcare and LPL Trustee each hold a 30.4 percent stake in Pharmacybrands and based on the company paying a similar dividend over the next five years, could potentially increase their respective stakes to 35.1 percent.

The dominant shareholders came out of a 2009 deal when NZX-listed Life Pharmacy, whose brands included Life Pharmacy, Life Metro and Care Chemist, made a $20 million all-scrip offer for Pharmacybrands, the country's then-biggest retail pharmacy group with the Amcal and Unichem brands.

An independent report by Simmons Corporate Finance found the plan's positive aspectsoutweighed its negatives, and is "unlikely to have any material impact on the Company’s share price or the liquidity of its shares" or diminish its appeal as a potential takeover target.

If shareholders don't approve the plan, Simmons estimated it could reduce Pharmacybrands' equity and cash balances by $4.3 million, or 3.6 cents per share. Pharmacybrands shares rose 4.2 percent to 99 cents yesterday, valuing the company at $119.3 million. The shares have climbed 20 percent this year, and have surged some 168 percent since the merger in 2009.

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond

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