medivac limited notice of extraordinary general meeting

Transcription

MEDIVAC LIMITED
ABN 64 055 747 941
NOTICE OF EXTRAORDINARY GENERAL MEETING
to be held on Wednesday 30 April, 2008
commencing at 11:00 am (Sydney time)
at The Wesley Conference Centre
220 Pitt Street, Sydney NSW 2000
THIS IS AN IMPORTANT DOCUMENT
If you are in doubt as to what to do
with this document please contact your
legal, financial or other professional advisor immediately
Contents
PROXY FORM
PART A: LETTER TO SHAREHOLDERS
PART B: NOTICE OF EXTRAORDINARY GENERAL MEETING
PART C: EXPLANATORY MEMORANDUM
PART D: INDEPENDENT EXPERT’S REPORT
Part A: Letter to Shareholders
27th March 2008
Dear Shareholder,
The Directors of MediVac Limited ACN 005 747 941 (Company) have called this
Extraordinary General Meeting for Shareholders to consider and, if thought fit, to
approve the Resolutions set out in the Notice of Meeting which accompanies this letter.
Following the Company’s AGM in November 2007 the Company appointed Messrs John
Evans and Nick Gatsios as Non- Executive Directors to fill casual vacancies on the
Board. Directors appointed by existing Directors must offer themselves for re-election at
the next following General Meeting of the Company. John Evans and Nick Gatsios now
offer themselves for confirmation of that appointment in Resolutions 1 & 2 respectively.
Details of their qualifications and experience are provided in the Explanatory Statement
which forms part of this Notice.
Following the above changes to the Board, the new Board resolved to ensure there was
adequate Working Capital to support its key initiatives and raised $1.04 million through
the following:
o
o
A placement of 48,565,971 shares @ $0.011 per share to independent
sophisticated investors under subsection 708(8) of the Corporations Act
to raise $534,226. Pursuant to ASX Listing Rules, the placement to
sophisticated investors being up to 15% of issued capital, was able to be
undertaken without obtaining shareholder approval.
An unsecured loan from an entity associated with Director Mr. Stephen
Copulos, raising $509,683, at an 11% interest rate. The loan is proposed
to be repaid by the proceeds of the issue of 46,334,792 shares @ $0.011
to the lending entity, subject to receiving shareholder approval.
Shareholder approval is sought at this meeting to approve the second share placement
above and to ratify the first placement in Resolutions 3 & 4 respectively. Full details are
provided in the accompanying Explanatory Statement.
The new Board has further evaluated its short to medium term working capital needs to
satisfactorily progress the Company’s programs in a timely fashion and to meet its loan
obligations. The Directors consider that further funds are required in addition to the funds
as raised above.
In order to give all shareholders the opportunity to participate, the Directors propose to
make an offer of a pro-rata Non Renounceable Rights Issue (the “NRRI”) of 2 new
shares for every three shares on issue at the Record Date. The record date will be set by
the Directors after conclusion of the EGM.
The NRRI will be underwritten to 90% by Citywest Corp Pty Ltd ATF The Copulos
(Sunshine) Unit Trust, an entity associated with Director, Stephen Copulos. Details of the
underwriting are provided in the commentary for Resolution 6.
The number of ordinary shares to be issued and the funds to be raised by the NRRI will
vary depending if Resolution 4 above is approved. Presuming that Resolution 4 is
approved and the offer is fully taken up, funds raised will amount to $2.512 million and
issued capital will increase to 697,789,838 ordinary shares.
Funds raised by the NRRI will be used to accelerate the commercialisation of the
MediVac Technology division, to continue research into the TraceSmart technology and
purchase necessary laboratory equipment, to repay some short term loans, reduce trade
creditors and to pay the costs of the NRRI.
Shareholder approval is sought for the NRRI and the proposed underwriting by entities
associated by Director Stephen Copulos in Resolutions 5 & 6 respectively.
The Directors of the Company unanimously (subject to Stephen Copulos abstaining on
Resolutions 4, 5 and 6) recommend to all Shareholders that they vote in favour of all
Resolutions required to implement the proposed transactions, and believe it is in the
best interests of the Shareholders to do so.
.
The attached Independent Expert’s Report from Lonergan Edwards & Associates
Limited states that in that company’s opinion, the passing of Resolutions 4 and 6 are fair
and reasonable to shareholders of the Company not associated with Stephen Copulos
or any of his related entities.
Please consider carefully the contents of this Notice of Meeting and the Explanatory
Statement.
If you are in any doubt as to any matter, please consult your legal, financial or other
professional advisor.
Yours faithfully
Paul McPherson
Executive Chairman
MediVac Limited
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MEDIVAC LIMITED
(ACN 055 747 941)
NOTICE OF EXTRAORDINARY GENERAL MEETING
Notice is hereby given that an Extraordinary General Meeting (“EGM”) of the Members of Medivac Limited (“the
Company”) will be held at The Wesley Conference Centre, 220 Pitt Street, Sydney NSW on Wednesday 30 April
2008 at 11:00am (“the meeting”).
If you are unable to attend the meeting, we encourage you to complete and return the enclosed Proxy Form. The
completed Proxy Form must be received at the Company’s share registry or the registered office of the Company,
at least 48 hours before the commencement of the meeting.
An Explanatory Statement is attached. Members are advised to read this in full as important background
information is included.
BUSINESS
1 & 2 - Re-election of Directors
Directors appointed by existing Directors must offer themselves for re-election at the next following General
Meeting. John Richard Evans and Nick Gatsios were appointed by the Board on 3 December 2007 and now offer
themselves for confirmation of that appointment.
Details of their qualifications and experience are provided in the accompanying Explanatory Statement which
forms part of this Notice.
Confirmation of the appointment of John Richard Evans
Resolution 1 – as an Ordinary resolution
“That John Richard Evans, a Director appointed to fill a casual vacancy since the 2007 Annual
General Meeting and who is eligible for re-election, be re-elected as a Director of the
Company.”
Confirmation of the appointment of Nick Gatsios
Resolution 2 – as an Ordinary Resolution
“That Nick Gatsios, a Director appointed to fill a casual vacancy since the 2007 Annual
General Meeting and who is eligible for re-election, be re-elected as a Director of the
Company.”
3 - Special Share Placement
On 11 December 2007 the Company made a special share placement to sophisticated investors not previously
associated with the Company. Full details are provided in the accompanying Explanatory Statement which forms
part of this Notice.
Approval of Special Share Placement
“That approval is given in accordance with ASX Listing Rule 7.4 and for all other purposes, to
the issue and allotment on 11 December 2007 of 48,565,971 fully paid ordinary shares in the
Company for a total consideration valued at $534,226 in the manner described in the
accompanying Explanatory Statement.”
Voting Restriction on resolution 3
In accordance with ASX Listing Rule 7.5.6, the Company will disregard any votes cast on Resolution 3
by:
• A person who participated in the issue of securities being the entities listed at Table 1 in the
accompanying Explanatory Statement which forms part of this Notice; and
• An associate of that person.
However, the Company need not disregard a vote if it is cast by:
• A person as a proxy for a person who is entitled to vote, in accordance with the directions on the
proxy form; or
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•
the person chairing the meeting as a proxy for a person who is entitled to vote, in accordance
with a direction on the proxy form to vote as the proxy decides.
4 - Issue of Shares to a Related Party
ASX Listing Rule 10.11 provides that a company may not issue shares to a director or a proposed director without
the approval of holders of ordinary shares. If approval is given under Listing Rule 10.11 then approval is not
required under Listing Rule 7.1. Resolution 4 relates to an unsecured loan made to the Company by Citywest Corp
Pty Ltd ATF The Copulos (Sunshine) Unit Trust. Stephen Copulos is a director of Citywest Corp Pty Ltd. Also,
the beneficiary of The Copulos (Sunshine) Unit Trust is a superannuation fund, of which Stephen Copulos is a
member. Full details of the circumstances giving rise to the issue are included in the accompanying Explanatory
Statement which forms part of this Notice and Members are advised to read this in full as important background
information is included.
Issue of shares to a related party to repay a loan made to the Company
“That for the purposes of ASX Listing Rule 10.11, and all other purposes, Members approve the
issue of a total of 46,334,792 Ordinary fully paid shares at 1.1 cents each to Citywest Corp Pty
Ltd ATF The Copulos (Sunshine) Unit Trust, in repayment of a loan of $509,683 made to the
Company by that entity.
In accordance with ASX Listing Rule 10.11, the Company will disregard any votes cast on Resolution 4
by:
• Citywest Corp Pty Ltd ATF The Copulos (Sunshine) Unit Trust, Copulos Superannuation Pty
Ltd ATF Copulos Provident Fund, Supermax Pty Ltd ATF Supermax Super Fund; and
• Any other associate of Citywest Corp Pty Ltd ATF The Copulos (Sunshine) Unit Trust, Stephen
Copulos, any entity controlled by Stephen Copulos or any associate of Stephen Copulos.
• a person as a proxy for a person who is entitled to vote, in accordance with the directions on the
proxy form; or
• the person chairing the meeting as a proxy for a person who is entitled to vote, in accordance
with a direction on the proxy form to vote as the proxy decides.
5 - Proposed Pro-rata Non Renounceable Rights Issue
The Directors propose to invite all shareholders to participate in a fully underwritten pro-rata non renounceable
rights issue (“NRRI”) of 2 shares for every 3 shares held at an issue price of 0.9 cents per share to raise
$2.52million. It is proposed that the NRRI will be underwritten to 90% by an entity associated with Director
Stephen Copulos.
Normally, in accordance with ASX Listing Rule 10.11 Exception 2, Members would not be required to approve a
pro-rata NRRI or an Underwriting Agreement with an associated entity of the Company, provided certain
Corporations Act 2001 and ASX Listing Rules exemptions are met. Your Directors consider that the underwriting
has been negotiated on arms length terms and the requisite exemptions have been met. However in view of all the
circumstances, your Directors have resolved to submit the pro-rata NRRI and the financial benefit to a related
party arising from the underwriting fee, to the Members for approval.
Further details are included in the accompanying Explanatory Statement which forms part of this Notice.
Approval of pro-rata non renounceable rights Issue
Resolution 5 – as an ordinary resolution
“That the members approve a pro-rata non renounceable rights issue of 2 new shares for each 3
ordinary shares held at the Record date to be determined by the Directors.”
The Company will disregard any votes cast on Resolution 5 by:
• Copulos Superannuation Pty Ltd ATF Copulos Provident Fund, or Supermax Pty Ltd ATF
Supermax Super Fund; and
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•
Any other associate of , Copulos Superannuation Pty Ltd ATF Copulos Provident Fund, or
Supermax Pty Ltd ATF Supermax Super Fund, Stephen Copulos, any entity controlled by
Stephen Copulos or any associate of Stephen Copulos.
• a person as a proxy for a person who is entitled to vote, (provided that such person who is
“entitled to vote” is not Copulos Superannuation Pty Ltd ATF Copulos Provident Fund, or
Supermax Pty Ltd ATF Supermax Super Fund or Citywest Corp Pty Ltd ATF The Copulos
(Sunshine) Unit Trust or any other associate of , Copulos Superannuation Pty Ltd ATF Copulos
Provident Fund, or Supermax Pty Ltd ATF Supermax Super Fund, Stephen Copulos, any entity
controlled by Stephen Copulos or any associate of Stephen Copulos) in accordance with the
directions on the proxy form; or
• the person chairing the meeting as a proxy for a person who is entitled to vote, (provided that
such person who is “entitled to vote” is not Copulos Superannuation Pty Ltd ATF Copulos
Provident Fund, or Supermax Pty Ltd ATF Supermax Super Fund or Citywest Corp Pty Ltd
ATF The Copulos (Sunshine) Unit Trust or any other associate of , Copulos Superannuation Pty
Ltd ATF Copulos Provident Fund, or Supermax Pty Ltd ATF Supermax Super Fund, Stephen
Copulos, any entity controlled by Stephen Copulos or any associate of Stephen Copulos) in
accordance with a direction on the proxy form to vote as the proxy decides.
6 - Financial Benefit for a Related Party
Citywest Corp Pty Ltd ATF The Copulos (Sunshine) Unit Trust , of which Trust a superannuation fund having
Stephen Copulos as one of its members is a beneficiary, has agreed to underwrite to 90% the pro-rata NRRI on
arms length commercial terms, to increase the possibility that the required funds do become available to the
Company. Consequently, pursuant to Section 208(1)(a)(i) of the Corporations Act 2001, your directors are seeking
approval to the financial benefit which will be received by Citywest Corp Pty Limited through its underwriting of
the pro-rata NRRI.
Further details and summary terms of the Underwriting Agreement are included in the accompanying Explanatory
Statement which forms part of this Notice.
Approval of related party transaction and financial benefit arising from payment of the underwriting fee
and management fee
“That the Members approve the related party transaction and financial benefit arising from the payment
of the underwriting fee and management fee by the Company to Citywest Corp Pty Ltd in accordance
with the underwriting agreement to be entered into between the Company and Citywest Corp Pty Ltd atf
The Copulos (Sunshine) Unit Trust.”
The Company will disregard any votes cast on Resolution 6 by:
• Citywest Corp Pty Ltd ATF The Copulos (Sunshine) Unit Trust, Copulos Superannuation Pty
Ltd ATF Copulos Provident Fund, Supermax Pty Ltd ATF Supermax Super Fund; and
• Any other associate of Citywest Corp Pty Ltd ATF The Copulos (Sunshine) Unit Trust, Stephen
Copulos, any entity controlled by Stephen Copulos or any associate of Stephen Copulos.
• a person as a proxy for a person who is entitled to vote, (provided that such person who is
“entitled to vote” is not Copulos Superannuation Pty Ltd ATF Copulos Provident Fund, or
Supermax Pty Ltd ATF Supermax Super Fund or Citywest Corp Pty Ltd ATF The Copulos
(Sunshine) Unit Trust or any other associate of , Copulos Superannuation Pty Ltd ATF Copulos
Provident Fund, or Supermax Pty Ltd ATF Supermax Super Fund, Stephen Copulos, any entity
controlled by Stephen Copulos or any associate of Stephen Copulos) in accordance with the
directions on the proxy form; or
• the person chairing the meeting as a proxy for a person who is entitled to vote, (provided that
such person who is “entitled to vote” is not Copulos Superannuation Pty Ltd ATF Copulos
Provident Fund, or Supermax Pty Ltd ATF Supermax Super Fund or Citywest Corp Pty Ltd
ATF The Copulos (Sunshine) Unit Trust or any other associate of , Copulos Superannuation Pty
Ltd ATF Copulos Provident Fund, or Supermax Pty Ltd ATF Supermax Super Fund, Stephen
Copulos, any entity controlled by Stephen Copulos or any associate of Stephen Copulos) in
accordance with a direction on the proxy form to vote as the proxy decides.
Page 4 of 4
Dated this 27th day of March 2008
By order of the Board
Mal Lucas-Smith
Company Secretary
Medivac Limited
Proxies
A member entitled to attend and vote at the meeting is entitled to appoint a proxy. A proxy need not be a member of the
Company. Proxies must be on the form approved by the Directors and must be lodged at the registered office of the Company
or the Company’s share registry, no later than forty-eight (48) hours before the commencement of the meeting that is by 11:00
am on Monday 28 April 2008, or an adjournment of that meeting. A form of proxy together with a return addressed envelope is
provided with this notice. Proxies may be faxed to the share registry at 02 9287 0309.
In accordance with the Corporations Act, a person’s entitlement to vote at the Extraordinary General Meeting will be
determined by reference to the number of fully paid shares registered in the name of that person (reflected in the register of
members) as at the close of business on Monday 28 April 2008.
Page 1 of 5
MEDIVAC LIMITED
(ACN 055 747 941)
EXPLANATORY STATEMENT
This Explanatory Statement has been prepared to provide Members with material information to enable them to make
informed decisions on the business to be conducted at the Extraordinary General Meeting of the Company to be held on
Wednesday 30 April 2008. Amongst other things, this Explanatory Statement provides Members with the information
required to be provided to Members by the Corporations Act 2001 and the Listing Rules of the Australian Securities
Exchange Limited (ASX Listing Rules).
BUSINESS
RESOLUTION 1 – as an Ordinary Resolution
Confirmation of the Appointment of John Richard Evans
Brief Biography
John Richard Evans B.Com (Hons), CA ASA MAICD
John (aged 37) is a qualified Chartered Accountant and currently the principal of a Business Advisory practice. John
advises a range of businesses in both the SME sector and larger corporate clients, on matters such as strategic planning,
marketing, governance, and financial analysis. Prior to this, John held a series of positions in Finance and General
Management over a 15 year period, across a wide range of industries including telecommunications, banking and
insurance, superannuation and funds management, media, hospitality, and property development. John’s approach to
advising businesses balances the need for practical, achievable solutions with the need to always keep in sight the
overall strategic objective. John is a Member of the Australian Institute of Company Directors, a director of two
unlisted companies and a not-for-profit community leadership organisation, and provides Board consulting services to
three other company groups.
The Board recommends Members vote in favour of this resolution. The Chairman will be casting undirected proxy
votes held by him in favour of this resolution.
RESOLUTION 2 – as an Ordinary Resolution
Confirmation of the Appointment of Nick Gatsios
Brief Biography
Nick Gatsios:
Nick (aged 44) is a director and co-founder of Teraform Advisory established to advise on the commercialisation of
intellectual property emanating from universities and research institutes in Australia. He was been responsible for
developing and establishing licence agreements and partnerships between appropriate partners which resulted in
increased value of client products/services and increased access to investment. Nick has an extensive network in local
and international financial institutions including Federal and State Governments. Nick has spent the past five years
building strong international networks and relationships where technology can be partnered to and developed through to
product and market. Nick through Teraform Advisory, has been successful in securing over $40 million in grants and
funding for clients. Nick is also a Director of HealthLinx Limited (HTX), a listed biotech company which uses
biomarkers to develop best practice diagnostics that detect and monitor diseases.
The Board recommends Members vote in favour of this resolution. The Chairman will be casting undirected proxy
votes held by him in favour of this resolution.
RESOLUTION 3 – as an ordinary resolution
In December 2007 the Company raised $534,226 by the issue and allotment of 48,565,971 fully paid ordinary shares at
1.1 cents per share by private placement with sophisticated investors introduced by Bell Potter Securities Limited (ABN
25 006 390 772 AFS Licence No. 243480). Table 1 below provides details of the allotments. None of the allottees are
related parties or associates of the Directors of the Company.
Table 1 – Details of Special Share Placement
Allottee
Number of
shares
Delregal Pty Ltd
18,565,972
Ropat Nominees Pty Ltd
11,363,636
International Corporate Services Pty Ltd
2,272,727
JJ Holdings (VIC) Pty Ltd
16,363,636
Allotment date
11 December 2007
11 December 2007
11 December 2007
11 December 2007
Issue price per
security
1.1 cents
1.1 cents
1.1 cents
1.1 cents
Page 2 of 5
The issued shares rank equally in all respects from the dates of allotment with other ordinary shares on issue. The funds
raised were to increase the working capital of the Company. Following the placement, the issued capital of the
Company increased to 372,339,111.
ASX Listing Rule 7.1 effectively allows the Company to issue new securities up to a limit of 15% of the existing issued
capital of the Company without prior approval of the shareholders. The shares issued in December 2007 were made
within this limitation.
Under ASX Listing Rule 7.4, shareholders may subsequently approve the issue of securities made within the limitation
prescribed by Listing Rule 7.1. The Company is seeking this approval. Following this approval, the Company will again
effectively be able to issue new securities up to a limit of 15% of its existing issued capital without prior approval of
shareholders.
The Board unanimously recommends Members vote in favour of this resolution. The Chairman will be casting
undirected proxy votes held by him in favour of this resolution.
RESOLUTION 4 - as an ordinary resolution
Issue of Shares to a Related Party to repay a loan made to the Company
On 6 December 2007 Citywest Corp Pty Ltd ATF The Copulos (Sunshine) Unit Trust, of which Trust a superannuation
fund having Stephen Copulos as one of its members is a beneficiary, and of which company, Stephen Copulos is a
director made an additional unsecured loan of $509,683 to the Company on the following terms:
lender – Citywest Corp Pty Ltd ATF The Copulos (Sunshine) Unit Trust (“Citywest”)
purpose – to assist with working capital;
interest rate – 11% per annum payable monthly;
repayment – to be repaid by the issue of fully paid ordinary shares to Citywest at 1.1 cents each, subject to shareholder
approval, if given by 30 April 2008;
term – From 6 December 2007 to the date which is the earlier of the issue of shares in the company at 1.1 cents each to
Citywest and 30 April 2008.
The Directors propose to repay the loan by the issue of 46,334,792 ordinary shares at 1.1 cents each, as soon as possible
after approval for same is received from shareholders and, approval is now sought for that issue. The issue price is the
same as that applicable to the special placement made to sophisticated investors as detailed in Resolution 3.
The Directors are mindful of the need to keep the Company cash outgoings to a minimum particularly during this
period of product establishment in the market. Accordingly, the Directors consider that repayment of the loan by the
issue of new shares is in the best interests of the Company.
ASX Listing Rule 10.11 provides that a company may not issue shares to an entity controlled by a director without the
approval of holders of ordinary shares. If approval is given under Listing Rule 10.11 then approval is not required under
Listing Rule 7.1.
Resolution 4 is subject to a voting exclusion statement which means that Citywest, Director Stephen Copulos and any
entity associated with him, may not vote on that resolution.
Table 2 - Proposed Issue of ORD shares to an entity controlled by Director S Copulos
Name
ORD Shares
Proposed Issue Date
Issue Price
Citywest Corp Pty Ltd ATF The 46,334,792
Within one month of the EGM $0.011
Copulos (Sunshine) Unit Trust
and subject to shareholder
approval by 30 April 2008
The issue of ORD shares detailed in Table 2 is conditional upon the approval of Resolution 4. If Resolution 4 is
approved the issued capital of the Company will increase to 418,673,903 ORD shares including the shares issued
pursuant to Resolution 3.
Following approval of Resolution 4, entities controlled by Director Stephen Copulos will control 19.9% of the issued
capital of the Company.
At the request of the Australian Securities & Investments Commission (ASIC) the Directors of the Company (other than
Stephen Copulos) have obtained an Independent Expert’s Report as to whether the proposed issue of shares the subject
of Resolution 4, is fair and reasonable to all shareholders of the Company not associated with Stephen Copulos or any
of his related entities. The Independent Expert’s Report from Lonergan Edwards & Associates Limited which is
attached to this Explanatory Statement states that in the opinion of the Independent Expert, Lonergan Edwards &
Page 3 of 5
Associates Limited the proposed issue of shares is fair and reasonable to the non-associated shareholders in the
Company.
The Board (with Stephen Copulos abstaining) recommends Members vote in favour of this resolution. The Chairman
will be casting undirected proxy votes held by him in favour of this resolution.
ITEM 5 – as an ordinary resolution
Pro-Rata Non Renounceable Rights Issue
The Directors consider that further working capital funds are required in addition to the funds raised by the recent
special placement (Resolution 3), and the loan to be converted to shares (Resolution 4), to ensure that sufficient funds
are available to satisfactorily progress the Company’s programs in a timely fashion and to meet the Company’. loan
obligations. In order to give all shareholders the opportunity to participate, the Directors propose to make an offer of a
pro-rata Non Renounceable Rights Issue (the “NRRI”) of 2 new shares for every three shares on issue at the Record
Date at a price of 0.9 cents per share. The record date will be set by the Directors after conclusion of the EGM.
The trading history of the Company shares over the last 12 months, including highest, lowest and most recent closing
price is as follows:
•
•
•
Highest: 7.7 cents per share
Lowest: 0.8 cents per share
Last closing price: 0.6 cents per share
The number of ordinary shares to be issued and the funds to be raised by the NRRI will vary depending if Resolution 4
above is approved. Presuming that Resolution 4 is approved and the offer is fully taken up, the issued capital of the
company and the funds to be raised will be as follows:
Table 3 – ordinary shares to be issued and funds raised by the NRRI
Ordinary Shares
Funds raised $
Currently issued
372,339,111
Proposed resolution 4
46,334,792
To repay loan
Proposed NRRI
279,115,935
2,512,043
Total issued capital
697,789,838
If resolution 4 is not approved the proposed NRRI issue will reduce to 248,226,074 ordinary shares, the funds raised
will reduce to $2.234million and the total issued capital will reduce to 620,565,185 ordinary shares.
Funds to be raised by the NRRI will be utilised as follows:
• To repay short term loans
• To reduce trade creditors
• Pay costs of NRRI including legal fees and underwriting fees
• To accelerate commercialisation of the MediVac Technology division,
to continue research into the TraceSmart product, to purchase laboratory
equipment and to cover general divisional operating costs of the Medivac
Technology division for the next 12 months the balance
$
800,000 (approx)
100,000 (approx)
150,000 (approx)
1,184,000
2,234,000
1,462,043
2,512,043
The Directors expect that during the second half of this calendar year, sales from Medivac Technology business will
have increased to the extent that operating costs within this business should be covered on an ongoing basis. This is
based upon forward projection of current ongoing revenue (i.e. regular monthly income) and cost reductions already
implemented, together with new monthly income resulting from new Sales and implementations of both the Metamizer
and Logmed machines, arising from the increased focus on Sales within this business.
The NRRI will be underwritten to 90% by Citywest Corp Pty Ltd (“Citywest”) ATF The Copulos (Sunshine) Unit
Trust, of which Trust a superannuation fund having Stephen Copulos as one of its members is a beneficiary. Stephen
Copulos is also a Director of Citywest. Details of the underwriting are provided in the comments for Resolution 6.
ASX Listing Rule 10.11 provides that a company may not issue shares to a director or an entity controlled by a Director
without the approval of holders of ordinary shares. However Listing Rule 10.12 Exception 1 permits a related party
receiving shares under a pro-rata issue without shareholder approval and Exception 2 permits receipt of shares under an
Page 4 of 5
underwriting agreement in relation to a pro-rata issue provided the terms of the underwriting are included in the offer
document sent to holders of ordinary shares. Again therefore, Shareholder approval would not normally be required for
the receipt of shares by entities controlled by director Stephen Copulos pursuant to the proposed Rights Issue, or by
Citywest in accordance with the operation of the underwriting agreement. Exception 2 ASX Listing Rule 7.1 will also
apply to Citywest as underwriter and would normally not require shareholder approval to the receipt of shares by
Citywest as underwriter.
The Directors have noted however, that the operation of the Underwriting Agreement may potentially take the holdings
controlled by Stephen Copulos up to a significant interest in the Company. In the circumstances, the Directors have
determined to seek Shareholder approval to the Underwriting Agreement.
Entities controlled by the Directors intend to take up their full entitlement under the NRRI.
If all other shareholders also take up their full entitlement then the Stephen Copulos controlled holdings will remain at
19.9%. If all shareholders do not take up their entitlement which is considered likely, Citywest will be called upon to
take up to 90% of the shortfall. As entities associated with Stephen Copulos (subject to approval of Resolution 4 above),
will already hold 19.9% of the issued capital of the Company, any issue resulting from the underwriting agreement will
take the holdings controlled by Stephen Copulos over the 20% threshold up to a potential 47.9% if the underwriting is
fully utilised because no other shareholders take up the offer. However the holdings will not trigger the takeover
provisions of the Act. Section 611 (Exemption 10) which deals with Rights Issues applies to the current circumstances
and exempts any resultant holding of over 20% by Stephen Copulos controlled entities from the takeover prohibition set
out in section 606(1) of the Act.
Stephen Copulos has declared that he has no intention of making a takeover offer for the Company.
will be casting undirected proxy votes held by him in favour of this resolution.
NOTE:
If Resolution 5 is approved but Resolution 6 is not approved, it is the intention of the Directors to proceed with a non
underwritten NRRI. In that case it is noted that the funds raised are expected to be substantially less than the amounts at
Table 3.
ITEM 6 – as an ordinary resolution
Financial Benefit for a Related Party
The offer of a pro-rata Non Renounceable Rights Issue referred to at Item 5 will be underwritten to 90% by Citywest
Corp Pty Ltd ATF The Copulos (Sunshine) Unit Trust. (“Citywest”), of which Trust a superannuation fund having
Stephen Copulos as one of its members is a beneficiary. Stephen Copulos is also a Director of Citywest. Citywest is
therefore a related party to the Company. The underwriting/management fee of 5% to be paid to Citywest under the
underwriting agreement is therefore a financial benefit that will be given to the related party, Citywest.
In the event that Citywest is required to take up its maximum exposure of 90% of the NRRI, then the
underwriting/administration fee payable to Citywest will be $113,041.95 (if Resolution 4 is approved) and $100,531.55
(if Resolution 4 is not approved). The payment to Citywest of the underwriting/management fee will decrease pro-rata
dependent on the excess over 10% of the NRRI, which is taken up by shareholders.
Section 208 of the Corporations Act 2001 (“The Act”) dealing with related party transactions and financial benefits
prohibits a public company from giving a financial benefit to a related party of the public company unless approval of
the public company’s shareholders is given or the giving of the benefit falls within an exception set out in Section 210
to 216 of the Act.
Shareholder approval is sought for the financial benefit to be given to Citywest. Citywest is to receive only the standard
underwriting/management fee which would be payable by the company to any other underwriter. Verification of this
fee by the company has been undertaken by way of seeking a quote from an independent third party broker. Therefore,
the payment of the underwriting fee falls within the exception set out in Section 210 of the Act as being a financial
benefit which would be reasonable if the Company and Citywest were dealing at arms length. Accordingly, shareholder
approval would not normally be required for the proposed entry by the Company into the underwriting agreement with
Citywest.
However, in view of all the circumstances, your Directors have resolved to submit the financial benefit to a related party
arising from the underwriting fee, to the Members for approval.
Page 5 of 5
Citywest has been chosen by the Company as the underwriter of the NRRI as it has been able to offer these services to
the Company at market rates, without delay and in circumstances where the Directors are of the view that the
underwriting risk may not be readily accepted by many underwriters and if so, may well be accepted at an underwriting
fee above the market rate. The Directors are also of the view that the take-up of any shortfall of shares pursuant to the
Underwriting Agreement would be best held by a current investor who has supported the Company previously and who
in the Director’s opinion is less likely than a third party underwriter to seek to sell shares in the Company issued to it
pursuant to an underwriting agreement.
will be casting undirected proxy votes held by him in favour of this resolution. None of the Directors, other than
Stephen Copulos has a financial or other interest in the related party transaction, the subject of this Item 6. Director
Stephen Copulos does have a financial interest in the financial benefit to be derived by Citywest a related party, in that
Stephen Copulos is a Director of Citywest and Stephen Copulos is a member of a superannuation fund, which is a
beneficiary of the Copulos (Sunshine) Unit Trust the trustee of which is Citywest. Citywest will receive the financial
benefit, the subject of this Item 6, as trustee of that Trust.
All of the Directors of the Company (with Stephen Copulos abstaining) recommend the entry by the Company into the
aforesaid Underwriting Agreement with Citywest and thereby the creation of a financial benefit for Citywest as a
related party to the Company for the reasons set out above, being in summary:
•
•
•
•
the underwriting transaction can take place quickly, without delay incurred through what potentially might be a
long due diligence process performed by other underwriters. It is a distinct benefit to the Company, for many
reasons, to raise the capital the subject of the NRRI, without delay.
the underwriting transaction is being made at market rates, in circumstances where the Directors are not confident
that many other underwriters would, on close examination underwrite the proposed issue, or if so, might only do
so at a premium above the underwriting/management fee requested by Citywest; and
the issue of shares to Citywest as underwriter following a shortfall, is in the Director’s view a benefit to the
Company in that it is less likely that Citywest will seek to sell any shares issued to it as underwriter; and
an underwriting generally of the NRRI is beneficial to the Company as it needs to raise maximum funds from that
issue to meet current expenses and also to be in a position to take advantage of ongoing research and development
opportunities for the overall financial benefit of the Company and its shareholders.
At the request of the Australian Securities & Investments Commission (ASIC) the Directors of the Company (other than
Stephen Copulos) have obtained an Independent Expert’s Report as to whether the terms and conditions of the
Underwriting Agreement the subject of Resolution 6, are fair and reasonable to all shareholders of the Company not
associated with Stephen Copulos or any of his related entities. The Independent Expert’s Report from Lonergan
Edwards & Associates Limited which is attached to this Explanatory Statement states that in the opinion of the
Independent Expert, Lonergan Edwards & Associates Limited the proposed Underwriting Agreement is fair and
reasonable to the non-associated shareholders in the Company.
Summary Material Terms of Underwriting Agreement
• Underwriter – CityWest Corp Pty Ltd ATF The Copulos (Sunshine) Unit Trust of which Trust a
superannuation fund having Stephen Copulos as one of its members is a beneficiary; Stephen Copulos is also
a Director of CityWest Corp Pty Ltd;
• Issue Shares – 279,115,935 ordinary shares subject to the approval of resolution 4, otherwise 248,226,074
ordinary shares;
• Price – 0.9 cents per share;
• Underwritten Amount - $2,260,839 subject to the approval of Resolution 4, otherwise $2,010,631;
• Underwriting/Management Fee – 5% of underwritten amount;
• Reimbursement of costs, expenses and disbursements associated with the underwriting;
• Closing Date – 28 days after the Opening Date (the opening date will be set by the Directors immediately after
the EGM)
• The Underwriting Agreement being lodged with ASIC and the ASX on or before 5:00pm on the Lodgement
date;
• The ASX granting approval on or before 5:00pm on the Opening Date which approval may be conditional
upon the issue Shares and other conditions usually imposed by the ASX;
• Standard Termination Events apply and the Underwriter has the right to waive the exercise of its rights
conditionally or unconditionally
The Independent Directors
MediVac Limited
Unit 8
Lot1B Kleins Road
Northmead NSW 2152
ABN 53 095 445 560
AFS Licence No 246532
Level 27, 363 George Street
Sydney NSW 2000 Australia
GPO Box 1640, Sydney NSW 2001
Telephone: [61 2] 8235 7500
Facsimile: [61 2] 8235 7550
www.lonerganedwards.com.au
18 March 2008
Subject:
Independent Expert’s Report on proposed recapitalisation
Dear Sirs
Introduction
1
As set out in the Explanatory Statement, and subject to shareholder approval,
MediVac Limited (MediVac) intends to:
(a)
issue approximately 46.3 million new shares to Citywest Corp Pty Ltd as
trustee for the Copulos (Sunshine) Unit Trust (Citywest)1 at 1.1 cents per
share in order to repay a debt owed by MediVac of approximately $0.510
million (excluding interest); and
(b)
undertake a Pro-rata Non Renounceable Rights Issue (NRRI) of 2 new
shares for every 3 shares on issue, underwritten to 90% by Citywest, to
raise a maximum of $2.51 million (before costs).
Scope
2
We have been requested by the Independent Directors of MediVac to provide our
opinion on whether the proposed share issue to Citywest to repay debt (referred
to in paragraph 1(a)) (the Proposal) is fair and reasonable to the non-associated
shareholders in MediVac.
3
The Underwriting Agreement between MediVac and Citywest is a related party
transaction and is likely to result in Citywest (and Mr Copulos) controlling in
excess of 20% (and up to a potential 47.9%) of the issued capital of MediVac
after the NRRI. Accordingly, the Independent Directors have also requested that
we provide our opinion on whether the terms and conditions of the Underwriting
Agreement between Citywest and MediVac (including the price at which the
shares will be issued to Citywest under the Underwriting Agreement) are fair and
reasonable to the non-associated shareholders in MediVac.
1
Citywest is an entity associated with Mr Stephen Copulos, a director of MediVac.
Liability limited by a scheme approved under Professional Standards Legislation
1
4
Our report has been prepared to assist the shareholders in MediVac in connection
with the above matters only. It does not provide a recommendation as to
whether shareholders should take up their entitlements to new shares under the
proposed NRRI. Shareholders in MediVac must therefore form their own view
as to whether or not they wish to take up their entitlement to new shares in
MediVac. This decision should be made by shareholders having regard to their
risk profile, liquidity preference and expectations as to value and future stock
market conditions.
Independence
5
Lonergan Edwards & Associates Limited (LEA) and its directors are
independent of Citywest and MediVac and have no interest in the outcome of the
recapitalisation proposal.
Summary of opinion
6
In our opinion the proposed share issue to Citywest to repay the debt advanced to
the company is fair and reasonable to the non-associated shareholders in
MediVac. This is principally because:
(a)
whilst MediVac has sufficient cash on hand as at 29 February 2008 to
repay the loan to Citywest, management’s projections indicate that
Medivac requires a significant equity injection to fund its ongoing
activities and remain a going concern
(b)
the price at which shares are to be issued to Citywest represents:
(i)
(ii)
(iii)
(iv)
a 57.1% premium to the listed market price of MediVac shares on
14 March 2008
a 22.2% premium to the price at which MediVac intends to issue
new shares under the NRRI 2
a premium to the price we believe the company could raise equity
in the absence of the Proposal and the underwritten NRRI
a premium to the market value of MediVac shares in the absence
of the share issue and underwritten NRRI (or an alternative
funding proposal)
(c)
the price of 1.1 cents per share is consistent with the price at which shares
were issued to sophisticated investors in December 2007
(d)
no superior alternative funding proposal has been received by MediVac.
2
It should be noted that the shares will be issued to Citywest on a cum-rights issue basis. Citywest will
therefore also receive an entitlement to acquire further shares under the NRRI at 0.9 cents per share on the
basis of 2 new shares for every 3 shares held.
2
7
In our opinion, the terms and conditions of the Underwriting Agreement between
Citywest and MediVac are fair and reasonable to the non-associated shareholders
of MediVac. This is because, in our opinion:
(a)
the size of the underwriting fee (and other fees) payable to Citywest is
fair and reasonable having regard to the risk associated with the
underwriting and the size of the capital raising
(b)
the price at which the shares are being underwritten represents a premium
to the listed market price of the shares, the price at which we believe
MediVac could raise funds in the absence of the underwriting and the
market value of MediVac shares in the absence of the share issue and
underwritten NRRI (or an alternative funding proposal)
(c)
no superior underwriting or funding proposal has been received by
MediVac.
General
8
We have considered the above matters from the perspective of the non-associated
shareholders in MediVac as a whole. However, the ultimate decision whether to
approve the resolutions at the EGM should be based on each shareholder’s
assessment of their own circumstances, having regard to, inter alia, their risk
profile, liquidity preference and expectations as to value and future stock market
conditions.
9
If shareholders are in doubt about the action they should take in relation to the
resolutions or matters dealt with in this report, shareholders should seek
independent professional advice.
10
For our full opinion on the above matters, MediVac shareholders should read the
remainder of our report.
Yours faithfully
Craig Edwards
Authorised Representative
Julie Planinic
Authorised Representative
3
Table of contents
Section
I
II
III
IV
Scope of our report
Profile of MediVac
Opinion on the proposed share issue
Opinion on the Underwriting Agreement
Paragraphs
11 – 31
32 – 50
51 – 77
78 – 103
Appendices
Financial Services Guide
A
Qualifications, declarations and consents
B
Glossary
C
4
I
Scope of our report
Purpose
11
ASX Listing Rule 10.11 states that an entity must not issue shares to an entity
controlled by a director without the approval of holders of the entity’s ordinary
shares. Approval is required by resolution at a general meeting.
12
ASX Listing Rule 10.12 Exception 1 permits a related party to receive shares
under a pro-rata rights issue and Exception 2 permits the receipt of shares under
an underwriting agreement in relation to a pro-rata issue provided the terms of
the underwriting agreement are disclosed in the offer document.
13
However, given the existence and operation of the Underwriting Agreement it is
likely that Citywest (and Mr Copulos) will control in excess of 20% of the issued
capital of MediVac after the NRRI.
14
Section 606 of the Corporations Act prohibits the acquisition of a relevant
interest in issued voting shares of a company if the acquisition results in the
person’s voting power in the company increasing from below 20% to more than
20%, or from a starting point between 20% and 90%, without making an offer to
all shareholders of the company.
15
Item 7 of Section 611 of the Corporations Act allows the non-associated
shareholders to waive this prohibition by passing a resolution at a general
meeting.
16
Regulatory Guide 74 “Acquisitions Agreed to by Shareholders” sets out the view
of the Australian Securities and Investment Commission (ASIC) on the operation
of what is now section 611(7) of the Corporations Act. Regulatory Guide 74
requires that shareholders approving a resolution pursuant to section 623 of the
Corporations Act (the predecessor to 611(7)) be provided with a comprehensive
analysis of the proposed transaction, including, whether or not the proposed
transaction is “fair and reasonable” to the non-associated shareholders. The
directors may satisfy their obligations to provide such an analysis by either:
17
(a)
commissioning an independent expert’s report, or
(b)
undertaking a detailed examination of the proposal (using specialist
valuations if required) and preparing a report for the non-associated
shareholders.
Consequently, the Independent Directors of MediVac have requested that
Lonergan Edwards & Associates Limited (LEA) prepare an Independent
Expert’s Report (IER) on whether:
(a)
the proposed share issue to Citywest is fair and reasonable to the nonassociated shareholders of MediVac
5
(b)
the terms and conditions of the Underwriting Agreement between
Citywest and MediVac (including the price at which the shares will be
issued to Citywest under the Underwriting Agreement) are fair and
reasonable to the non associated shareholders of MediVac
together with the reasons for this opinion.
Basis of assessment
18
In preparing our report we have given due consideration to the Policy Statements
and Practice Notes issued by ASIC, particularly Regulatory Guide 74
“Acquisitions Agreed to by Shareholders”, and Regulatory Guide 111 “Content
of Expert Reports”.
19
As noted above, ASIC Regulatory Guide 74 states that in satisfying their
obligations to shareholders the directors must provide an analysis as to whether
the proposal is “fair and reasonable” when considered in the context of the
interests of the existing shareholders in MediVac.
20
ASIC Regulatory Guide 111 – Content of Expert Reports states that an issue of
shares requiring approval under item 7 of section 611 of the Corporations Act 3
should be analysed as if it were a takeover bid under Chapter 6 4 . Accordingly,
the expert is required to assess the transaction in terms of the convention
established for takeovers pursuant to section 640 of the Corporations Act), being:
(a)
(b)
is the offer “fair” and
is it “reasonable” 5 .
21
When assessing takeovers, an offer is “fair” if the value of the offer price or
consideration is equal to or greater than the value of the securities the subject of
the offer. Further, this comparison should be made assuming 100% ownership of
the company and is irrespective of whether the offer is cash or scrip.
22
An offer is “reasonable” if it is fair. An offer may also be reasonable if, despite
being “not fair”, there are sufficient reasons for security holders to accept the
offer in the absence of any higher bid before the close of the offer.
23
Specifically, for the purpose of assessing an issue of shares where the allottee
acquires greater than 20% but less than 50% of the company incorporating the
merged business (and thus, conventionally, does not provide the vendor / allottee
with control of the company incorporating the merged business), Regulatory
Guide 111 requires that the value of the consideration offered be assessed against
the value of the shares issued to the allottee on a controlling interest basis (ie
including a control premium), even though control may not ordinarily pass.
3
In particular, the acquisition of an interest of greater than 20% in the acquiring entity by the vendor, by
the issue of shares by the acquirer to the vendor.
4
RG111.21 provides an example of such an issue of shares that is comparable to a takeover bid, being
where a company issues shares to a vendor of another entity or the vendor of a business and as a
consequence, the vendor acquires over 20% of the company incorporating the merged business.
5
RG111.23 and RG111.9.
6
24
Regulatory Guide 111 also states that the expert should identify the advantages
and disadvantages of the proposal to the shareholders not associated with the
transaction, and should provide an opinion on whether the advantages of the
proposal outweigh the disadvantages 6 .
25
In LEA’s opinion, assessing the “fairness” of the proposed share issue or the
price at which Citywest will acquire shares under the Underwriting Agreement
by comparing the effective issue price with the value of 100% of MediVac
(including a full control premium) does not necessarily assist the non-associated
shareholders in MediVac in making an informed choice as to whether to approve
the share issue or the underwriting arrangements. This is because 100%
ownership is not being transferred. Accordingly, for the purpose of this analysis,
we have placed greater emphasis on whether the advantages of the proposed
share issue to Citywest and the terms and conditions of the Underwriting
Agreement outweigh the disadvantages to the non-associated shareholders of
MediVac.
26
The basis upon which we have assessed the Underwriting Agreement is
discussed in section IV.
Limitations and reliance on information
27
Our opinions are based on the economic, market and other conditions prevailing
at the date of this report. Such conditions can change significantly over
relatively short periods of time.
28
Our report is also based upon financial and other information provided by
MediVac. We have considered and relied upon this information and believe that
the information provided is reliable, complete and not misleading and we have
no reason to believe that material facts have been withheld. The information
provided was evaluated through analysis, enquiry and review for the purpose of
forming the opinions set out in this report. However, in assignments such as this,
time is limited and we do not warrant that our enquiries have identified or
verified all of the matters which an audit, extensive examination or “due
diligence” investigation might disclose. None of these additional tasks have
been undertaken.
29
We understand the accounting and other financial information that was provided
to us has been prepared in accordance with the Australian equivalent to
International Financial Reporting Standards (AIFRS).
30
An important part of the information base used in forming an opinion of the kind
expressed in this report is the opinions and judgement of management of the
relevant companies. This type of information has also been evaluated through
analysis, enquiry and review to the extent practical. However, it must be
recognised that such information is not always capable of external verification or
validation.
6
RG 111.39.
7
31
In forming our opinion, we have also assumed that the information set out in the
Explanatory Statement is complete, accurate and fairly presented in all material
respects.
8
II
Profile of MediVac
Background
32
MediVac is an Australian company which provides solutions to the healthcare
industry for onsite waste management and disposal. MediVac (formally Legend
Nautilus) was incorporated in 1997 and listed on the Australian Stock Exchange
in February 2004. The company is based in Sydney.
33
MediVac owns the MetaMizer technology for clinical waste treatment. It is an
on-site device that sterilises and granulates clinical and sharps waste and
converts it into a safely disposable general healthcare facility waste.
34
The company has received government an R&D Concessional Loan of $900,000
during its operation.
35
MediVac has commercialised this patented technology for the treatment of
biological waste with the primary focus to change the way the health care
industry disposes of its clinical and sharps waste. However, sales of the
MetaMizer machines to date have been insufficient to make the company
profitable.
36
In May 2007 MediVac entered into a Joint Venture Agreement with Globetech
Environmental Inc, a US listed company that manufactures Logmed waste
management technology similar to MediVac’s technology. As recently
announced, the parties to this agreement are varying the legal form of this
agreement to a strategic alliance between the parties with certain rights to sell
each other’s product in certain markets.
37
In August 2007 MediVac acquired Diakyne Ltd (Diakyne) by issuing
approximately 203 million shares. Diakyne owns the TraceSmart technology for
quantitative analysis of constituent elements in fluids such as blood and other
fluids. The Trace Smart technology has not yet reached the commercialisation
phase.
9
Financial performance
38
MediVac’s financial performance for the years ended 30 June 2006 and 2007 and
for six months ended 31 December 2007 is summarised below:
Operating revenue
EBITDA
Depreciation and amortisation
EBIT
Net interest expense
Significant items
Loss before income tax
Income tax benefit/(expense)
Loss after tax
30-Jun-06
$000
726
30-Jun-07
$000
979
6 months to
31-Dec-07
$000
282
(1,715)
(193)
(1,908)
30
(7,419)
(9,297)
922
(8,375)
(2,380)
(172)
(2,552)
(13)
(618)
(3,183)
320
(2,863)
(971)
(68)
(1,039)
(118)
(1,157)
(1,157)
39
As shown above, MediVac has incurred losses in recent years and in the half
year ended 31 December 2007. A further loss is expected to be incurred in the
half year ended 30 June 2008.
40
The financial performance for the year ended 30 June 2007 reflects:
41
7
(a)
sales of two MetaMizer II devices to the United Kingdom and securing
contracts with Townsville and St Vincent Private hospitals
(b)
receipt of some $21,000 in Government grants (which includes an export
market development grant)
(c)
revenue of approximately $239,000 7 from the strategic alliance with
Logmed, from Logmed machine sales in Europe
(d)
asset write-downs of some $618,000, which includes a write down of
MediVac Technology Pty Ltd’s intangible assets to nil.
The financial performance for the six months ended 31 December 2007 reflects:
(a)
revenue of $282,000, compared to approximately $801,000 in the six
months ended 31 December 2006 which included export sales of two
machines to the UK
(b)
monthly (annuity) income from MetaMizer and Logmed machines
increased 87% over the corresponding period
MediVac’s share.
10
(c)
research and development expenses were incurred in conjunction with the
development of the Diakyne TraceSmart technology
(d)
the net loss (excluding the loss from Diakyne of $315,469) was 41%
lower than the same period last year.
Cash flow
42
MediVac’s cash flow statement for the years ended 30 June 2006 and 30 June
2007 and for six months ended 31 December 2007 is summarised below:
Cash flow statement
Receipts from customers
Payments to suppliers
Net interest payment
Other (1)
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities:
Proceeds from issue of shares
Proceeds from borrowings
Other (2)
Net increase (decrease) in cash
Year to
30-Jun-06
$000
822
(2,337)
30
653
(832)
(97)
Year to
30-Jun-07
$000
1,065
(3,019)
(13)
341
(1,626)
(66)
6 months
to
31-Dec-07
$000
392
(1,631)
(75)
58
(1,256)
993
400
1,190
504
400
402
534
412
683
(529)
Note:
1 Includes tax offsets and government grants.
2 Costs of capital raising and other.
43
As indicated above cash flow deficit generated from MediVac’s operating
activities has been funded by the issue of new shares and additional borrowings.
44
During the half year to 31 December 2007 MediVac acquired Diakyne and
issued approximately 203 million shares to Diakyne shareholders. Diakyne had
some $1.1 million of cash at the date of acquisition.
45
We have reviewed the quarterly cash flow statements since March 2005 and note
that cash flow from operating activities has been negative in all quarters except
two (quarter ending September 2005 and quarter ending December 2006).
11
46
47
We have also reviewed MediVac management’s projected cash flows for the
period to 31 December 2009. This forecast indicates that:
(a)
sales from the MediVac technology business during the second half of
this calendar year should increase to the extent that operating costs within
this business should be covered on an ongoing basis by the end of this
calendar year
(b)
Diakyne technology operations will continue to use cash in order to
develop the product further towards commercialisation
(c)
corporate overheads are some $38,000 per month
(d)
monthly loan repayments are to be made on the AusIndustry loan.
If the proceeds of the NRRI are not received, MediVac is forecast to exhaust its
current cash resources by May / June 2008.
Financial position
48
MediVac’s financial position as at 31 December 2007 (subject to audit review)
and unaudited financial position as at 29 February 2008 is summarised below:
Balance Sheet
Consolidated
Audited
31-Dec-07
$000
Consolidated
Unaudited
29-Feb-08
$000
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Current tax assets
Property, plant and equipment
Intangible assets
Total assets
1,243
201
102
350
375
210
2,343
4,824
761
434
102
136
375
210
2,343
4,361
Trade and other payables
Financial liabilities
Provisions
Other
Total liabilities
383
2,250
223
45
2,901
202
2,230
222
52
2,706
Net assets
1,923
1,655
Net tangible assets
(420)
(688)
Note:
1 Financial liabilities for 31 Dec 2007 include $1,268,000 current and $982,000 non-current
financial liabilities.
12
49
Key points with respect to MediVac’s financial position are as follows:
(a)
cash and cash equivalents decreased by some $480,000 in the two-month
period from 31 December 2007 to 29 February 2008
(b)
intangible assets relating to the Diakyne acquisition represent
approximately 50% of total assets
(c)
approximately $1.2 million of financial liabilities as at 31 December
2007 were repayable within 12 months
(d)
financial liabilities include government funding received by MediVac
amounting of some $900,000 by way of a R&D Start Loan Grant in 2003.
This loan is not interest bearing but is repayable over 36 motnhs from
February 2008 to January 2011
(e)
net tangible assets are negative $0.4 million as at 31 December 2007 and
negative $0.7 million as at 29 February 2008.
Share capital
50
MediVac currently has 372,339,111 ordinary shares on issue as at 31 December
2007. There are also 31,332,133 unlisted options on issue exercisable at various
prices.
13
III
Opinion on the proposed share issue
Ability to remain a going concern
51
The financial position of MediVac as at 29 February 2008, together with the proforma financial position assuming the proposed share issue and underwritten prorata rights issue takes place, is shown below:
Unaudited
Financial
position
29/2/08(1)
$m
Impact of
share issues
$m
Impact of
pro-rata
rights
issues(2)
$m
Current assets
Cash
Trade and other receivables
Inventories
Other current assets
Current assets
0.8
0.4
0.1
0.5
1.8
-
1.5
1.5
2.3
0.4
0.1
0.5
3.3
Non-current assets
Property, plant and equipment
Intangible assets
Non-current assets
0.2
2.3
2.5
-
-
0.2
2.3
2.5
Total assets
4.3
-
1.5
5.8
Liabilities
Trade and other payables
Financial liabilities
Provisions
Other
Total liabilities
0.2
2.2
0.2
2.7
(0.5)
(0.5)
(0.1)
(0.8)
(0.9)
0.1
0.9
0.2
1.3
Net assets (liabilities)
1.6
0.5
2.4
4.5
(0.7)
0.5
2.4
2.2
Net tangible assets (liabilities)
Pro-forma
Financial
position
$m
Note:
1 Source: Consolidated management accounts.
2 Assuming a minimum capital raising of $2.5 million (being the amount underwritten) less associated costs of
$0.1 million.
52
Having regard to MediVac’s actual financial position as at 29 February 2008, the
likely loss in FY08 and discussions with the Independent Directors of MediVac,
in our opinion, the future financial viability of MediVac is uncertain (and may
not remain a going concern) unless shareholders approve the proposed share
issue or an alternative funding proposal is received.
14
53
This opinion is also supported by the following statement made in MediVac’s
financial statements for the half year ended 31 December 2007:
“Together with the recent injection of Working Capital, the planned pro rata
non-renounceable rights issue to raise up to a further $2.5 million, and the
continued focus on cost reduction, Directors are confident there is adequate
funding to pursue the Company’s strategy.
The Directors have relied on signed contracts regarding these events in
concluding that MediVac Limited remains a going concern as at the date of this
report.”
54
The above statement indicates that MediVac is dependant on the conversion of
the debt owing to Citywest (from the injection of working capital) and the NRRI
to continue its strategy and to remain a going concern.
55
If the proposed share issue and the underwritten NRRI takes place:
56
(a)
MediVac will be in a net cash position, as its cash balances will exceed
its financial liabilities
(b)
the net asset position of MediVac will be significantly improved.
Consequently, in our opinion, MediVac is more likely to remain a going concern
if the resolutions to be tabled at the EGM are approved. However, MediVac
shareholders should note that MediVac may need to raise additional capital in
future in order to meet its business objectives.
Net tangible asset position
57
As set out in the table in paragraph 51, the net tangible asset (NTA) position of
MediVac increases from negative $0.7 million to positive $2.2 million (as at 29
February 2008 on a pro-forma basis) if the share issue is approved and the
proposed rights issue takes place and raises a minimum of $2.5 million (before
costs).
15
Comparison with recent share prices
58
The share price of MediVac over the period 1 January 2007 to 10 March 2008 is
shown below:
MediVac Limited
Share Price History: Daily from 1 Jan 07 to 10 Mar 08
($)
0.085
0.075
0.065
0.055
0.045
0.035
0.025
0.015
0.005
Jan-07
59
60
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
Substantial share price falls occurred in June and August 2007. Significant ASX
announcements by the company during this period included:
(a)
an announcement on 28 June 2007 that MediVac has executed a Share
Sale Agreement with all the shareholders in Diakyne to acquire each of
their shareholdings. The consideration for the acquisition was the issue
of approximately 203 million shares
(b)
an announcement on 3 August 2007 that a former company officer had
not met the repayment schedule in connection with a loan entered into in
June 2004
(c)
a further announcement on 10 August 2007 that the former company
officer denies his indebtedness to MediVac.
In more recent periods MediVac’s shares have traded as shown below:
Period
Start
11-Sep-07
11-Dec-07
11-Feb-08
End
10-Mar-08
10-Mar-08
10-Mar-08
VWAP (1)
Low
High
0.0115
0.0109
0.0077
0.0060
0.0060
0.0060
0.0160
0.0140
0.0110
Volume
000
64,394
35,764
8,833
Note:
1 Volume weighted average price.
16
61
The proposed share issue price of 1.1 cent approximates the VWAP of
MediVac’s shares over the period 11 September 2007 to 10 March 2008.
Further, the proposed share issue price is consistent with the private placement
made to sophisticated investors introduced by Bell Potter Securities Limited in
December 2007. None of the investors in the placement were related parties or
associates of the directors of MediVac.
62
However, we note that the price at which shares are to be issued to Citywest
represents a significant premium to both the current market price of the shares
and the price at which MediVac intends to issue new shares under the NRRI.
Value of MediVac prior to the proposed share issue and NRRI
63
In forming our opinion on the proposed share issue we have also considered the
value of MediVac shares prior to the proposed share issue and the underwritten
NRRI.
64
It is difficult to reliably determine the current market value of MediVac shares.
This is principally due to the uncertainty regarding:
(a)
(b)
(c)
the future performance of the MediVac technology business (which is not
yet cash flow positive)
the Diakyne technology operations, which have not yet achieved
technical and commercial success
MediVac’s ability to obtain the level of funding necessary to enable it to
pursue its objectives and remain a going concern.
65
Further, we note that MediVac has no track record of profitability and has
historically incurred significant operating cash flow deficits.
66
However, as stated above, in the absence of the share issue and underwritten
NRRI (or an alternative funding proposal):
67
(a)
there is significant uncertainty as to whether MediVac will be able to pay
its liabilities when they fall due as its current cash resources are expected
to be exhausted in May / June 2008
(b)
MediVac is likely to have insufficient cash resources to continue its
business activities, which require funding in order to commercialise the
MediVac technology business and further develop the Diakyne
technology
(c)
as at 29 February 2008 MediVac had negative net tangible assets of
$688,000.
Further, the directors of MediVac have advised that no alternative funding
proposals have been received by the company.
17
68
Consequently, should the proposed share issue and underwritten NRRI not
proceed (and no alternative funding proposal emerge) it is likely that MediVac
will be unable to continue as a going concern. In such circumstances a voluntary
administrator would be appointed and shareholders are unlikely to receive any
significant value for their shares.
69
In our opinion, the issue price of the shares therefore significantly exceeds the
value of MediVac shares in the absence of the share issue and underwritten
NRRI (or an alternative funding proposal).
Control
70
If the proposed share issue for the conversion of debt is approved by
shareholders Citywest (and associates) will own approximately 19.9% of
MediVac, as shown below:
Shareholding pre and post the Proposal
Shareholder
Copulos Group
Holdings
Other shareholders
Total
Shareholdings:
Copulos Provident
Fund
Supermax Super
Fund
Citywest
Citywest (and
associates)
Other shareholders
Total
Shareholdings as
at 28 February
2008
Number of
shares to be
issued under the
Proposal
Shareholdings if
Proposal is
approved1
36,981,315
335,357,796
372,339,111
46,334,792
46,334,792
83,316,107
335,357,796
418,673,903
0.5%
0.5%
9.9%
9.9%
-
9.5%
10.4%
19.9%
89.6%
100.0%
80.1%
100.0%
Note:
1 Shareholding is prior to undertaking the pro-rata rights issue. As set out in Section V
Citywest’s shareholding in MediVac is likely to increase further as a result of the
Underwriting Agreement.
71
Mr Copulos and entities associated with him will therefore significantly increase
their shareholdings in MediVac.
18
Dilution
72
If the proposed share issue takes place the combined interest held by existing
shareholders in MediVac other than the Copulos Group will be diluted to 80.1%
of all shares on issue 8 . In our opinion, given the financial position of MediVac,
this dilution cannot be avoided.
Likelihood of a future takeover bid
73
As the Copulos Group will hold some 19.9% of MediVac if the Proposal is
approved, in our opinion the likelihood of a future takeover offer for MediVac is
potentially diminished. Further, Mr Copulos has stated that he has no intention
of making a takeover offer for the company.
Alternative funding proposals
74
The Directors of MediVac have advised us that no alternative funding proposals
have been received by the company.
75
Further, in our opinion, if Citywest was to withdraw its financial support for
MediVac it is unlikely that a third party would emerge to enable MediVac to
continue to operate as a going concern. However, even if such an investor could
be found, in our opinion, it is very unlikely that they would pay in excess of 1.1
cents per share.
76
Consequently, in our opinion, the Proposal represents the best alternative for
shareholders in the absence of a superior proposal.
Conclusion
77
Based on the above, we have concluded that the proposed share issue to Citywest
is fair and reasonable to the non-associated shareholders in MediVac. This is
principally because:
(a)
whilst MediVac has sufficient cash on hand as at 29 February 2008 to
repay the loan to Citywest, management’s projections indicate that
Medivac requires a significant equity injection to fund its ongoing
activities and remain a going concern
(b)
the price at which shares are to be issued to Citywest represents:
(i)
8
a 57.1% premium to the listed market price of MediVac shares on
14 March 2008
Prior to the pro-rata rights issue.
19
(ii)
a 22.2% premium to the price at which MediVac intends to issue
new shares under the NRRI 9
(iii)
a premium to the price we believe the company could raise equity
in the absence of the Proposal and the underwritten NRRI
(iv)
a premium to the market value of MediVac shares in the absence
of the share issue and underwritten NRRI (or an alternative
funding proposal)
(c)
the price of 1.1 cents per share is consistent with the price at which shares
were issued to sophisticated investors in December 2007
(d)
no superior alternative funding proposal has been received by MediVac.
9
It should be noted that the shares will be issued to Citywest on a cum-rights issue basis. Citywest will
therefore also receive an entitlement to acquire further shares under the NRRI at 0.9 cents per share on the
basis of 2 new shares for every 3 shares held.
20
IV
Opinion on the Underwriting Agreement
Terms and conditions
78
MediVac and Citywest have entered into an agreement whereby Citywest will
underwrite 90% of MediVac’s NRRI (the Underwriting Agreement).
79
The key terms of the Underwriting Agreement are as follows:
80
(a)
Citywest will subscribe (or procure subscription) for all MediVac shares
not subscribed for under the NRRI, to a maximum of 90% of the new
shares
(b)
MediVac will pay Citywest an underwriting fee of some $90,434 (plus
GST), being approximately 4% of the amount to be underwritten
(c)
MediVac will pay Citywest a management fee of approximately $22,608
(plus GST), being approximately 1% of the amount to be underwritten
(d)
Citywest will also be reimbursed by MediVac for all reasonable out of
pocket expenses, legal expenses and third party disbursements (plus
GST) which have been capped at an amount agreed between the parties.
It should be noted that the Underwriting Agreement is conditional upon:
(a)
shareholder approval being obtained for the financial benefit Citywest
will obtain under the Underwriting Agreement
(b)
Citywest being satisfied that there has not been a material adverse event
with respect to MediVac or which could materially impact on the rights
issue
(c)
MediVac not breaching any of its obligations under the Underwriting
Agreement
(d)
all necessary regulatory approvals being obtained.
21
Basis of assessment
81
82
In order to assess whether the terms and conditions of the Underwriting
Agreement are fair and reasonable to the non-associated shareholders of
MediVac we have had regard to:
(a)
the size of the underwriting fee (and management fee) payable to
Citywest, having regard to the risk associated with the underwriting, the
size of the capital raising and market evidence as to underwriting fees
generally
(b)
the pricing of the rights issue relative to the listed market price of
MediVac
(c)
the pricing of the rights issue relative to the market value of the shares in
MediVac in the absence of the underwritten rights issue (or an alternative
funding proposal)
(d)
the fact that the rights issue is pro-rata and non-renounceable
(e)
the potential impact the Underwriting Agreement has on the control of
MediVac
(f)
the implications for MediVac if the rights issue is not underwritten
(g)
the fairness of the other fees payable to Citywest
(h)
the conditions of the Underwriting Agreement which must be satisfied in
order for the underwriting to occur
(i)
other benefits and disadvantages, including the possibility of a higher
level of shareholder participation due to Citywest’s involvement
(j)
whether the Underwriting Agreement contains any unusual terms and
conditions
(k)
whether, on balance, the Underwriting Agreement is on similar terms and
conditions to that which would have been negotiated if Mr Copulos /
Citywest had no shareholding in / association with MediVac.
These matters are discussed below.
22
The underwriting and management fee
83
As stated above Citywest is entitled to an underwriting fee of some $90,434 (plus
GST), or 4% of the underwritten amount to be raised under the NRRI. However,
Citywest (and associates) will hold a 19.9% interest in MediVac if the proposed
share issue is approved, which means that the underwriting risk Citywest faces is
for 70.1% of the rights issue only 10 . Thus, the effective underwriting fee given
its exposure is 5.1% 11 .
84
Citywest is also entitled to a management for of approximately $22,608 (plus
GST), or approximately 1% of the underwritten amount to be raised under the
NRRI.
85
In comparison we set out below a summary of the underwriting fees payable in
connection with recent rights issues in Australia:
Underwriting fees on rights issues
Date
Mar-08
Mar-08
Jan-08
Jan-08
Jul-07
May-07
Oct-06
Oct-06
Issuer
Canberra Investment
Corporation
Iluka Resources
Windimurra Vanadium
Pike River Coal
Maximus Resources
Hutchison
Telecommunications
(Australia)
Horizon Oil
KH Foods
Sep-06
Sep-06(4)
Nov-05
Oct-05
DoloMatrix International
TOWER Australia Group
ERG
Healthscope
Sep-05
Macmahon Holdings
Aug-05
Coates Hire
Mar-05
Australian Infrastructure
Fund
Origin Energy
Australian Agricultural
Company
Capral Aluminium
Mar-05
Mar-05
Mar-05
Underwriter
Guiness Peat Group (Australia)
Amount
raised
$ million
Underwriting
Fee
%
3.25(6)
15.8
ABN Amro Equity Capital
Markets / Citigroup
Euroz Securities
McDouall Stuart Group
Patersons Securities
Hutchison Whampoa
ABN AMRO Morgan Corporate
Pitt Capital Partners /
Washington H Soul Pattinson
and Company
Bridges Financial Services
GPG
Macquarie Equity Capital
Markets / Goldman Sachs
JBWere
Patersons Securities / Wilson
HTM Corporate Finance
Markets
Deutsche Bank / UBS
Citigroup / Deutsche Bank
ABN AMRO Morgans / ABN
AMRO Rothschild
GPG
353.0
54.8
60.0
5.8
2.25
3.00
2.50
5.00
2,850.0
24.6
0.40
3.25
45.0
31.4
160.0
30.5
2.7(1)
5.0
1.75(2)
4.00
129.2
2.50
31.5
4.00
158.7
2.13
225.0
641.0
2.50
1.50
66.7
33.1
1.75
3.00
10
Being 90% of the rights issue less the 19.9% held by Citywest and associates.
Being the underwriting fee of $90,434 divided by the amount to be raised under the rights issue ($2.5
million) divided by 70.1%.
11
23
Underwriting fees on rights issues
Date
Feb-05
Feb-05
Aug-04
Aug-04
Jul-04
Jun-04
Apr-04
Mar-04
Issuer
JF Meridian Trust
TOWER
Primelife Corporation
Prime Infrastructure
ERG
SP Telecommunications
Roc Oil Company
Alinta
Feb-04
Oxiana
Underwriter
JP Morgan
GPG
Tricom Equities
UBS / Wilson HTM
ABN AMRO Morgans
Goldman Sachs JBWere
Markets
Markets / Goldman Sachs
JBWere
Amount
raised
$ million
126.9
139.0
50.0
187.0
67.0
89.6
49.9
Underwriting
Fee
%
1.99
1.75(2)
3.00(3)
3.50
4.00
2.75(4)
3.70
465.0
1.90
189.0
2.25
Note:
1 Effective underwriting fee given PCP/WHSP’s exposure was 6.3%.
2 Effective underwriting fee given GPG’s exposure was 2.18%.
3 Equity component of capital raising only (ie excluding the note offer).
4 The underwriting fee was not payable in connection with the shares issued to the major shareholder,
WHSP.
5 Announcement date not date of rights issue.
6 Effective underwriting fee given GPG’s exposure is 11.2%.
86
In addition we have reviewed the level of underwriting fees paid in connection
with new listings in Australia. The underwriting fees payable in connection with
these new issues are broadly consistent with the underwriting fees payable in
connection with rights issues, as shown below:
Underwriting fees on IPOs
Date
Oct-07
May-07
May-07
Apr-07
Apr-07
Issuer
Aus Tex Oil
Halcygen Pharmaceuticals
ThinkSmart
Multiplex European Property
Fund
Slater & Gordon
Contango Capital Partners
Apr-07
Mar-07
Sep-06
Jul-06
Jul-06
Jan-06
Nov-05
Nov-05
Aussie Q Resources
Arasor International
Multiplex Acumen Prime
Property Fund
Mariner Pipeline Income Fund
VDM Group
Oaks Hotels & Resorts
Rubicon Europe Trust Group
Underwriter
Lonsec
Tollhurst
JP Morgan
National Australia
Bank / CommSec
Austock
ABN Amro Morgans
Capital
Findlay & Co
Stockbrokers
Acumen Capital
Securities & ANZ
Group
CommSec
ABN Amro Morgans
Deutsche Bank AG /
Market
Capitalisation
at issue price
$m
49.1
38.0
204.0
Amount
raised
$m
20.0
12.5
85.6
Underwriting
Fee
%
4.25
4.00
3.50
247.0
107.8
184.5
35.0
2.00
4.00
100.0
85.0
2.30
28.0
138.7
10.0
35.0
6.00
4.50
169.0
137.0
54.3
129.7
258.7
101.5
137.0
8.2
30.0
258.7
1.00
3.00
4.00
3.00
3.00
24
Underwriting fees on IPOs
Date
Issuer
Oct-05
Sep-05
Alinta Infrastructure
Babcock & Brown Wind
Partners
Regional Express Holdings
Fone Zone
Reckson New York Property
Trust
Challenger Infrastructure Fund
Sep-05
Sep-05
Aug-05
Jul-05
Jun-05
APN European Retail Trust
May-05
Apr-05
Apr-05
Mar-05
Mar-05
Mar-05
Feb-05
Feb-05
Feb-05
Feb-05
Becton Developments
Domino’s Pizza Australia New
Zealand Limited
JF Industrial Trust
Australian Energy
Developments
Macquarie Prologis Income
Trust (SHEDS - Hybrid
Securities)
Macquarie Capital Alliance
Group
Babcock & Brown Japan
Property Trust
Select Managed Funds
Everest Babcock & Brown
Alternative Investment
Management
Hastings High Yield Fund
Underwriter
Merrill Lynch
UBS AG Australia
JP Morgan / UBS AG
Tricom Equities
UBS AG Australia
Citigroup Global
Markets, UBS AG
Citigroup Global
Markets Australia /
JP Morgan Australia
Merrill Lynch / JP
Morgan
Austock Corporate
Finance
Goldman Sachs
JBWere
JP Morgan Australia
CommSec
Market
Capitalisation
at issue price
$m
Amount
raised
$m
Underwriting
Fee
%
925.8
740.7
3.40
674.5
115.0
125.2
378.7
35.0
62.0
2.50
2.00
2.75
263.0
263.0
1.25
315.0
315.0
2.50
180.1
180.1
1.50
152.9
15.0
4.00
132.0
120.5
74.8
120.5
2.50
2.00
92.6
55.0
4.25
150.0
150.0
2.25
500.0
500.0
2.50(1)
297.7
297.0
297.7
110.4
2.00
3.00
300.0
300.0
2.00
150.0
150.0
3.25(2)
Macquarie Equity
Capital Markets
Macquarie Equity
Capital Markets /
Goldman Sachs
JBWere
UBS AG Australia
UBS AG Australia
UBS AG Australia /
Tricom Equities /
Wilson HTM
UBS AG Australia /
Westpac
Note:
1 Underwriting fees and funds raised based on first instalment. Second instalment is not underwritten. Underwriting
fees not payable on the shares issued to Macquarie Bank.
2 Underwriting fees based on first instalment (2/3's of the offer). 2.25% for the final instalment.
87
Generally, underwriting fees are a function of, inter alia, the size of the issue, the
underwritten price relative to the price of shares underwritten prior to the capital
raising and the risk associated with the underwriting (being the probability that
the underwriter will be called upon to purchase shares under the Underwriting
agreement).
25
88
While the underwriting and management fee payable to Citywest is relatively
high (after allowance for Citywest’s 19.9% entitlement) we note that:
(a)
the size of the rights issue relative to the existing capital base of MediVac
is high
(b)
in the absence of the recapitalisation proposal (which includes the
underwritten NRRI) MediVac may not be a going concern
(c)
given the size of the rights issue and the financial position of MediVac
there is likely to be a high number of shareholders who do not take up
their entitlements
(d)
no superior underwriting proposal has been received.
89
Further, we note that the underwriting and management fee percentages to be
charged by Citywest under the Underwriting Agreement are identical 12 to the
proposal received from an independent broking firm. However, no firm contract
was provided as to the price at which the broker would underwrite the share
issue, which was conditional upon (amongst other conditions) the receipt of subunderwriting agreements.
90
Consequently, in our opinion, the size of the underwriting fee payable to
Citywest is fair and reasonable.
The rights issue price
91
The rights issue price is 0.9 cents per share. This price exceeds the listed market
price of MediVac shares on 14 March 2008 by around 28.6%.
Value of MediVac prior to the proposed share issue and NRRI
92
As set out in paragraphs 63 to 69, if the proposed share issue and underwritten
NRRI does not proceed and no alternative funding proposal is received,
MediVac is unlikely to remain a going concern. In such circumstances a
voluntary administrator would be appointed and shareholders are unlikely to
receive any significant value for their shares.
93
Accordingly, in our opinion, the issue price of the shares under the underwritten
rights issue significantly exceeds the value of MediVac shares in the absence of
the share issue and underwritten NRRI (or an alternative funding proposal).
12
We note that the management fee to be received by Citywest is based on the underwritten amount
whereas the independent broker proposed a 1% fee of the total offer.
26
Impact on control of MediVac
94
Mr Copulos and Citywest will own 19.9% of MediVac if the proposed
conversion of debt to ordinary shares referred to in paragraph 1(a) is approved by
shareholders. However, as a result of the Underwriting Agreement any
entitlements not taken up by shareholders will be taken up by Citywest in its
capacity as underwriter. It is therefore likely that Citywest (and Mr Copulos)
will further increase its shareholding in MediVac as a result of the Underwriting
Agreement 13 .
95
Accordingly, Citywest may significantly increase its shareholding and voting
power in MediVac as a result of the Underwriting Agreement and will be able to
retain any shares acquired. Mr Copulos has stated that he has no intention of
making a takeover bid for MediVac.
Implications if the rights issue is not underwritten
96
The Independent Directors of MediVac have advised that the NRRI has been
underwritten to ensure that sufficient capital is raised to provide sufficient funds
for the company to pursue its business strategy, reduce debt and to strengthen the
financial position of MediVac.
97
If the Underwriting Agreement is not approved, the Directors intend to proceed
with the NRRI however the level of funds raised is likely to be significantly
lower.
98
Consequently, in the absence of the recapitalisation proposal (including the
underwritten rights issue) MediVac may not be able to operate as a going
concern.
Other fees payable to Citywest
99
As indicated above Citywest will be reimbursed for all reasonable out of pocket
expenses, legal fees and third party disbursements. In our experience, based on
the terms and conditions of other underwriting agreements, it is normal for
MediVac to pay these costs.
Other benefits of the underwriting
100
In our opinion, Mr Copulos and Citywest’s continued support for MediVac
(through their existing holdings, provision of financial support and Citywest’s
underwriting commitment) may result in a higher level of shareholder
participation in the rights issue compared with the position if Citywest was not
underwriting the rights issue.
13
Entities controlled by the Directors of MediVac intend to take up their entitlement. However, if no
other shareholders take up the NRRI, Citywest (and associates) will hold some 47.9% of MediVac.
27
101
Given MediVac’ current financial position, in our opinion, it is also unlikely that
an alternative underwriter would be prepared to underwrite the rights issue on the
terms and conditions offered by Citywest.
102
Further, even if an alternative underwriter could be found, in our view, such an
underwriter is likely to sell shares acquired under any underwriting arrangement,
which would place downward pressure on the MediVac share price post the
rights issue. In contrast, Citywest and Mr Copulos, as current investors, are
more likely to retain any shares acquired.
Conclusion
103
Based on the above, we have concluded that the terms and conditions of the
Underwriting Agreement are fair and reasonable to the non-associated
shareholders of MediVac. This is because, in our opinion:
(a)
the size of the underwriting fee (and other fees) payable to Citywest is
fair and reasonable having regard to the risk associated with the
underwriting and the size of the capital raising
(b)
the price at which the shares are being underwritten represents a premium
to the listed market price of the shares, the price at which we believe
MediVac could raise funds in the absence of the underwriting and the
market value of MediVac shares in the absence of the share issue and
underwritten NRRI (or an alternative funding proposal)
(c)
no superior underwriting or funding proposal has been received by
MediVac.
28
Appendix A
Lonergan Edwards & Associates Limited
1
Lonergan Edwards & Associates Limited (ABN53 095 445 560) (LEA) is a
specialist valuation firm which provides valuation advice, valuation reports and
Independent Expert’s Reports in relation to takeovers and mergers, commercial
litigation, tax and stamp duty matters, assessments of economic loss, commercial
and regulatory disputes.
2
LEA holds Australian Financial Services Licence No 246532.
3
The Corporations Act 2001 authorises LEA to provide this Financial Services
Guide (FSG) in connection with its provision of an Independent Expert’s Report
(IER) to be sent to MediVac shareholders.
4
This FSG is designed to assist retail clients in their use of any general financial
product advice contained in the IER. This FSG contains information about LEA
generally, the financial services we are licensed to provide, the remuneration we
may receive in connection with the preparation of the IER, and if complaints
against us ever arise how they will be dealt with.
Financial services we are licensed to provide
5
Our Australian financial services licence allows us to provide a broad range of
services to retail and wholesale clients, including providing financial product
advice in relation to various financial products such as securities, derivatives,
interests in managed investment schemes, superannuation products, debentures,
stocks and bonds.
General financial product advice
6
The IER contains only general financial product advice. It was prepared without
taking into account your personal objectives, financial situation or needs.
7
You should consider your own objectives, financial situation and needs when
assessing the suitability of the IER to your situation. You may wish to obtain
personal financial product advice from the holder of an Australian Financial
Services Licence to assist you in this assessment.
29
Appendix A
Fees, commissions and other benefits we may receive
8
LEA charges fees to produce reports, including this IER. These fees are
negotiated and agreed with the entity who engages LEA to provide a report.
Fees are charged on an hourly basis or as a fixed amount depending on the terms
of the agreement with the person who engages us. In the preparation of this IER
our fees are based on a time cost basis using agreed hourly rates.
9
Neither LEA nor its directors and officers receive any commissions or other
benefits, except for the fees for services referred to above.
10
All of our employees receive a salary. Our employees are eligible for bonuses
based on overall performance and the firm’s profitability, and do not receive any
commissions or other benefits arising directly from services provided to our
clients. The remuneration paid to our directors reflects their individual
contribution to the company and covers all aspects of performance. Our
directors do not receive any commissions or other benefits arising directly from
services provided to our clients.
11
We do not pay commissions or provide other benefits to other parties for
referring prospective clients to us.
Complaints
12
If you have a complaint, please raise it with us first, using the contact details
listed below. We will endeavour to satisfactorily resolve your complaint in a
timely manner.
13
If we are not able to resolve your complaint to your satisfaction within 45 days
of your written notification, you are entitled to have your matter referred to the
Financial Industry Complaints Services (FICS), an external complaints
resolution service. You will not be charged for using the FICS service.
Contact details
14
LEA can be contacted by sending a letter to the following address:
Level 27
363 George Street
Sydney NSW 2000
(or GPO Box 1640, Sydney NSW 2001)
30
Appendix B
Qualifications, declarations and consents
Qualifications
1
LEA is a licensed investment adviser under the Corporations Act. LEA’s
authorised representatives have extensive experience in the field of corporate
finance, particularly in relation to the valuation of shares and businesses and
have prepared more than 80 Independent Expert’s Reports.
2
This report was prepared by Mr Craig Edwards and Ms Julie Planinic who are
each authorised representatives of LEA. Mr Edwards and Ms Planinic have
over 14 years and 10 years experience respectively in the provision of
valuation advice.
Declarations
3
This report has been prepared at the request of the Independent Directors of
MediVac to be sent to MediVac shareholders. It is not intended that this
report should serve any purpose other than as an expression of our opinion as
to whether the proposed issue of shares to Citywest and the terms and
conditions of the Underwriting Agreement are fair and reasonable to the nonassociated shareholders of MediVac.
Interests
4
At the date of this report, neither LEA, Mr Edwards nor Ms Planinic have any
interest in the outcome of the proposals. LEA is entitled to receive a fee of
$12,500 plus GST for the preparation of this report based on time expended at
our standard hourly professional rates. With the exception of the above fee,
LEA will not receive any other benefits, either directly or indirectly, for or in
connection with the preparation of this report.
Indemnification
5
As a condition of LEA’s agreement to prepare this report, MediVac agrees to
indemnify LEA in relation to any claim arising from or in connection with its
reliance on information or documentation provided by or on behalf of
MediVac which is false or misleading or omits material particulars or arising
from any failure to supply relevant documents or information.
Consents
6
LEA consents to the inclusion of this report in the form and context in which it
is included in MediVac’ Explanatory Statement.
31
Appendix C
Glossary
ASIC
ASX
EGM
FICS
FSG
IER
MediVac
LEA
VWAP
Australian Securities & Investments Commission
Australian Stock Exchange
Extraordinary General Meeting
Financial Industry Complaints Services
Independent Experts Report
MediVac Limited
Lonergan Edwards & Associates Limited
Volume weighted average price
32
MediVac Limited
Please return your Proxy forms to:
Link Market Services Limited
Level 12, 680 George Street, Sydney NSW 2000
Locked Bag A14, Sydney South NSW 1235 Australia
Telephone: (02) 8280 7454
Facsimile: (02) 9287 0309
ASX Code: MDV
Website: www.linkmarketservices.com.au
ACN 055 747 941
APPOINTMENT OF PROXY
If you would like to attend and vote at the Extraordinary General Meeting,
please bring this form with you. This will assist in registering your attendance.
*X99999999999*
X99999999999
I/We being a member(s) of MediVac Limited and entitled to attend and vote hereby appoint
A
the Chairman
of the Meeting
(mark box)
OR if you are NOT appointing the Chairman of the
Meeting as your proxy, please write the name of the
person or body corporate (excluding the registered
securityholder) you are appointing as your proxy
or failing the person/body corporate named, or if no person/body corporate is named, the Chairman of the Meeting, as my/our proxy to act generally at
the meeting on my/our behalf and to vote in accordance with the following instructions (or if no directions have been given, as the proxy sees fit) at the
Extraordinary General Meeting of the Company to be held at 11:00am on Wednesday, 30 April 2008, at The Wesley Conference Centre, 220 Pitt Street,
Sydney NSW and at any adjournment of that meeting.
Where more than one proxy is to be appointed or where voting intentions cannot be adequately expressed using this form an additional form of proxy is
available on request from the share registry. Proxies will only be valid and accepted by the Company if they are signed and received no later than 48 hours
before the meeting. The Chairman of the Meeting intends to vote undirected proxies in favour of all items of business.
B
To direct your proxy how to vote on any resolution please insert
For
Resolution 1
Confirmation of the Appointment of John
Richard Evans
Against
Abstain*
X
in the appropriate box below.
Resolution 5
Resolution 3
Resolution 6
Against
Abstain*
Issue of Shares to a Related Party to repay
a loan made to the Company
Resolution 2
Confirmation of the Appointment of Nick
Gatsios
For
Resolution 4
Approval of Pro-rata Non Renouceable
Rights Issue
Approval of Related Party Transaction and
Financial Benefit arising from payment of
the underwriting fee and management fee
* If you mark the Abstain box for a particular Item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in
computing the required majority on a poll.
SIGNATURE OF SECURITYHOLDERS – THIS MUST BE COMPLETED
Securityholder 1 (Individual)
Joint Securityholder 2 (Individual)
Joint Securityholder 3 (Individual)
Sole Director and Sole Company Secretary
Director/Company Secretary (Delete one)
Director
This form should be signed by the securityholder. If a joint holding, either securityholder may sign. If signed by the securityholder’s attorney, the power of attorney must have
been previously noted by the registry or a certified copy attached to this form. If executed by a company, the form must be executed in accordance with the securityholder’s
constitution and the Corporations Act 2001 (Cwlth).
Link Market Services Limited advises that Chapter 2C of the Corporations Act 2001 requires information about you as a securityholder (including your name, address and
details of the securities you hold) to be included in the public register of the entity in which you hold securities. Information is collected to administer your securityholding and
if some or all of the information is not collected then it might not be possible to administer your securityholding. Your personal information may be disclosed to the entity in
which you hold securities. You can obtain access to your personal information by contacting us at the address or telephone number shown on this form. Our privacy policy is
available on our website (www.linkmarketservices.com.au).
MDV PRX841
*MDV PRX841*
C
How to complete this Proxy Form
1 Your Name and Address
This is your name and address as it appears on the company’s share register. If this information is incorrect, please make the correction
on the form. Shareholders sponsored by a broker should advise their broker of any changes. Please note: you cannot change ownership
of your shares using this form.
2 Appointment of a Proxy
If you wish to appoint the Chairman of the Meeting as your proxy, mark the box in section A. If the person you wish to appoint as your proxy
is someone other than the Chairman of the Meeting please write the name of that person in section A. If you leave this section blank, or
your named proxy does not attend the meeting, the Chairman of the Meeting will be your proxy. A proxy need not be a shareholder of the
company. A proxy may be an individual or a body corporate.
3 Votes on Items of Business
You should direct your proxy how to vote by placing a mark in one of the boxes opposite each item of business. All your shares will be voted
in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any item by inserting the percentage
or number of shares you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on the items of business, your
proxy may vote as he or she chooses. If you mark more than one box on an item your vote on that item will be invalid.
4 Appointment of a Second Proxy
You are entitled to appoint up to two persons as proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy, an
additional Proxy Form may be obtained by telephoning the company’s share registry or you may copy this form.
To appoint a second proxy you must:
(a)on each of the first Proxy Form and the second Proxy Form state the percentage of your voting rights or number of shares applicable
to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise
half your votes. Fractions of votes will be disregarded.
(b)return both forms together.
5 Signing Instructions
You must sign this form as follows in the spaces provided:
Individual:
where the holding is in one name, the holder must sign.
Joint Holding:
where the holding is in more than one name, either securityholder may sign.
Power of Attorney: to sign under Power of Attorney, you must have already lodged the Power of Attorney with the registry. If you have not
previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form
when you return it.
Companies:
where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that
person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary,
a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director
or a Company Secretary. Please indicate the office held by signing in the appropriate place.
If a representative of the corporation is to attend the meeting the appropriate “Certificate of Appointment of Corporate Representative” should
be produced prior to admission. A form of the certificate may be obtained from the company’s share registry.
Lodgement of a Proxy
This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below by 11:00am on Monday,
28 April 2008, being not later than 48 hours before the commencement of the meeting. Any Proxy Form received after that time will not be
valid for the scheduled meeting.
Proxy forms may be lodged using the reply paid envelope or:
–
by posting, delivery or facsimile to MediVac Limited’s share registry as follows:
MediVac Limited
C/- Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
Facsimile: (02) 9287 0309
– delivering it to Level 12, 680 George Street, Sydney NSW 2000.

medivac limited notice of extraordinary general meeting

Transcription

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