PharmAust makes $2.3m merger offer to AHG5-January-07 by Mark...

PharmAust makes $2.3m merger offer to AHG
5-January-07 by Mark Pownall

PharmAust makes $2.3m merger offer to AHG - 05 Jan, 1


Nedlands drug discovery and manufacturing group
PharmAust Ltd has made a surprise $2.3 million
merger proposal to Advance Healthcare Group Ltd.
The move is the latest twist in a series of dramatic
events surrounding the two companies and a third
player, Hawkesbridge Private Equity which already
has sought to take control of AHG.
Prominent WA investor Michael Boyd has also
become involved in the legal manoeuvring around
AHG, which owns pharmaceutical wholesaler
Cottman and a corporate pharmacy licence.
PharmAust said its offer was 50 per cent above
Hawkesbridge's recapitalisation offer, which was
accepted by AHG shareholders in August in a
contentious vote being disputed by PharmAust.
PharmAust has been engaged in legal action
against AHG over the validity of share transactions
that took place before the vital meeting to vote on
the Hawkesbridge offer which involved a debt for
equity swap.
The complex Hawkesbridge proposal would have resulted in up to 80 per cent of AHG being controlled by the Sydney
investment fund.
However, Hawkesbridge sold an 11 per cent shareholding on the eve of the meeting to newly appointed Advance
Healthcare chief executive Ken Atkinson.
Since then, Hawkesbridge has sold most of interest in AHG to Subiaco-based Covenant Nominees Pty Ltd, an entity
associated with former WA businessman Michael Boyd.
PharmAust said the 1.5-cents-per-share offer was a 50 per cent premium to the offer from Hawkesbridge and would be of
greater benefit to all shareholders.
PharmAust managing director Paul D'Sylva said his company had been highly critical of the dilutionary effect of the
Hawkesbridge move.
"The challenge for us is to put up or shut up," he said.
"We believe this represents better value for all shareholders including ourselves."
Below are the statements from PharmAust today and AHG from November 29:
PharmAust Limited (ASX:PAA) (PharmAust) announced today that it has submitted to the board of Advance Healthcare
Group Ltd (AHG) a merger proposal which includes an intention to make an offer for all of the ordinary fully paid shares in
AHG for a cash consideration of $0.015 per share, or a scrip alternative of equivalent value.
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The price of $0.015 per share is superior and represents a substantial benefit to AHG shareholders compared with the
terms of the Hawkesbridge Limited Offer, which was endorsed by the AHG board at the Extraordinary General Meeting of 2
August, 2006.
The experts report prepared for the purposes of that meeting and consideration of the Hawkesbridge Limited Offer, valued
the shares in AHG at nil.
Any offer shall be conditional on 90% minimum acceptance, PharmAust receiving all approvals which are required by law
or by any regulatory authority with such approvals remaining in full force and effect until completion, the capital structure
(including number and type of all outstanding equity, debt and hybrid securities on issue and any loans or other financial
accommodation provided) of AHG remaining unaltered until completion, AHG providing full details including relevant legal
documentation in respect of the loans or other financial accommodation (including equity or hybrid securities investments)
provided to it by Hawkesbridge Limited and its associates and no material adverse change to AHG.
PharmAust has also requested of the board of AHG that it be allowed to conduct due diligence, which may lead to further
conditions being required.
PharmAust believes that a merger of the two companies would create significant shareholder value for the shareholders of
both companies due to strategic and cost synergies that exist upon the combination of the two businesses.
Shareholders of each of PharmAust and AHG should exercise caution in trading and/or dealing in the shares of either
company, as there is no certainty that merger terms will be agreed upon or that a formal offer will be made.
A further announcement will be made once the terms of any transaction have been agreed.
Below is the November 29 statement from AHG:
Hawkesbridge Private Equity has today informed the Company that it has agreed to sell the entire convertible noteholding
in the Company held by Hawkesbridge Limited and HET No. 1 Pty Ltd to Covenant Nominees Pty Ltd, an entity associated
with Mr Michael Boyd.
The sale will also include Covenant acquiring 80,000,000 shares in the Company from Hawkesbridge reducing
Hawkesbridge's shareholding in the Company to approximately 5%.
The above transactions will require the approval of AHG shareholders at an extraordinary meeting of shareholders which
the Company expects to hold in late January 2007.
To assist the Company with its ongoing funding, Covenant has agreed to loan the Company $1m which will be convertible
into 40,000,000 shares in the Company at 2.5 cents.
The directors of the Company are extremely supportive of the above transaction which effectively sees the replacement of
a financial investor with an extremely well credentialed and substantive industry player. Further details of the transaction
will be provided to shareholders in due course.