TIDMSLWD
RNS Number : 2958J
Silverwood Brands PLC
12 December 2022
DATE: 12 December 2022
Silverwood Brands plc
("Silverwood" or the "Company")
Acquisition of stake in Lush and
Acquisition of Sonotas Group Companies
Silverwood Brands plc, an enterprise company established to
invest primarily in branded consumer businesses, is pleased to
announce it has taken a significant step forward in its strategic
plan through the acquisitions of interests in two consumer brands
comprising Lush, a UK headquartered international cosmetics
retailer, and Sonotas, a Japan-based skincare manufacturer.
Silverwood has conditionally acquired approximately a 19.8%
stake ("Lush Sale Shares") in each of Lush Cosmetics Limited
("LCL") and Lush Cosmetic Warriors ("LCW"), together ("Lush") from
Executive Director, Andrew Gerrie and his wife Alison Hawksley
together ("Lush Vendors"), and in addition, the Company has
conditionally acquired 90% of the share capital of Sonotas Holdings
Corporation and 100% of Sonotas Corporation from Executive
Director, Andrew Tone and other sellers.
Lush Acquisition
Terms of Acquisition:
Silverwood has entered into a sale and purchase agreement ("Lush
SPA") to acquire the Lush Sale Shares from the Lush Vendors. The
total consideration for the acquisition of the Lush Sale Shares
amounts to approximately GBP 216,802,000 ("Lush Consideration
Price") to be satisfied via the issue and allotment of 228,212,632
new ordinary shares ("Consideration Shares") to the Lush Vendors at
the price of 95p per share, being the closing price of a Silverwood
share the business day immediately before this announcement. The
Lush Consideration Price was calculated based on the applicable
minimum prices that the Lush Vendors may sell each Lush Sale Share
in accordance and in compliance with the articles of association of
LCL and CWL respectively. Each of those articles of association
state that the prescribed price at which each Lush Sale Share may
be sold shall not be lower than " the median price of the prices as
determined and certified in writing by two independent firms of
chartered accountants as being in their opinion the fair value
thereof between a willing buyer and willing seller valuing the
Company on a going concern basis ". Two independent valuations were
carried out to determine the prescribed price pursuant to the
articles of association of LCL and CWL respectively .
The Lush Vendors have agreed to a lock in and orderly market
arrangement with the Company in relation to the Consideration
Shares pursuant to which, save for limited circumstances, they will
not dispose of dispose of any interest in the Consideration Shares
for a period of 5 months from Admission and for a further period of
12 months thereafter, only dispose of the Consideration Shares
through the Company's broker from time to time to ensure an orderly
market.
Application has been made for the Consideration Shares to trade
on the AQSE Growth Market ("Admission") which is expected to be on
or around 15 December 2022, this being the final condition to be
satisfied for completion of the Lush SPA .
In addition, pending the registration of Silverwood or its
nominee as a shareholder of LCL and CWL, the Lush Vendors have
granted to Silverwood full contractual powers to direct, and to
give binding instructions to them in respect of, and to control,
the exercise and/or non-exercise of any and all rights, powers and
privileges attaching to the Lush Sale Shares including voting,
participation and attendance at shareholder meetings.
The Lush Vendors have entered into a relationship agreement with
Silverwood and VSA Capital, its AQSE Corporate Adviser, with effect
from Admission, to regulate the relationship between them to ensure
that the Company will at all times be capable of carrying on its
business for the benefit of the Company's shareholders as a whole
and all transactions and arrangements between the Company and the
Lush Vendors will be at arm's length and on normal commercial
terms.
Related Party Transaction
Due to Andrew Gerrie being an Executive Director of Silverwood,
the Lush Acquisition is deemed to be a related party transaction in
accordance with AQSE Access Rule 4.6 of the AQSE Rules for
Companies. The Company's directors (excluding Andrew Gerrie, who is
directly interested in the Lush transaction), having exercised
reasonable care, skill and diligence, consider that the terms of
Lush Acquisition are fair and reasonable insofar as the
shareholders of the Company are concerned.
Background to Lush:
Lush is a manufacturer and seller of fresh handmade skincare
goods and cosmetic products. LCL is the operating company
responsible for the management of the business whilst CWL owns the
rights to the Lush brand and controls the research and development
of new products.
Lush operates retail outlets in 48 countries and has
manufacturing facilities in 6 nations. It produces a wide range of
beauty and personal care products which include: creams, soaps,
shampoos, shower gels, lotions, moisturisers, fragrances, scrubs,
toothpaste tablets, masks and other cosmetics for the face, hair,
and body using only vegetarian or vegan recipes.
According to published annual accounts of Lush filed at
Companies House, in the year ended 30 June 2021, Lush's aggregated
turnover (for both LCL and CWL) was GBP408 million, representing a
6.6% decrease on 2020. This was in large part due to the impact of
Covid-19 and the subsequent lockdown restrictions. During the
Coronavirus pandemic, Lush implemented a review and restructuring
of its business which in 2021 led to a GBP32.4 million rise in
EBITDA to GBP41.1 million and a profit before tax figure of GBP29.2
million, an increase of GBP74.4 million from 2020.
In the year ended 30 June 2021, the net assets of the Company
grew by approximately GBP29.7 million to GBP150.5 million compared
to 30 June 2020. This was due to a substantial GBP33.3 million
decrease in Lush's total liabilities which was only slightly offset
by an approximately GBP3.5 million fall in its total assets.
In September 2021, Lush acquired its North American partner
businesses for CAD$180 million (GBP143 million), plus CAD$20
million deferred consideration. This acquisition should add
significantly to Lush's revenue in the coming years given the size
of the opportunity of the US market. Going forward, Lush has stated
its intent for immediate investment to grow the business
Andrew Gerrie was appointed a director of Lush in 1995 and
worked alongside the co-founders to expand the business before
leaving the management team in 2015.
Investment Rationale and Strategy:
Lush is a British success story and is now a well-established
brand with a defined global footprint and the potential to meet
strong growth targets in the future. The acquisition last year of
its North American partner business has paved the way for a
substantial increase in revenue and stronger cash flows over the
short-term as well as the opportunity to expand its physical and
online presence in the US and Canadian market. The Directors of
Silverwood ("Directors") believe the Lush Consideration Price is an
attractive acquisition price which they expect could result in a
significant upside for Silverwood shareholders.
The Directors believe that there will be substantial long-term
gains that Silverwood stands to make by owning a stake in Lush and
intends to hold its stake in Lush for the long-term. The Directors
plan to engage positively with the Lush management, other
shareholders and stakeholders to explore ways in which, together,
they can maximise value for all parties. Silverwood's Directors
have an extensive professional network and significant experience
in the consumer brands space which should prove useful in
generating new ideas to invigorate and strengthen the Lush
brand.
The Directors believe that, as an AQSE quoted company,
Silverwood will provide an opportunity for Lush customers to invest
indirectly into Lush and reap the benefits of their continued
support throughout the years. Silverwood and stakeholders will in
future look to acquire additional shareholdings from other
minorities and drive forward maximising value for all
stakeholders.
Nevertheless, as a private group, Lush is only required to
publish accounting information in accordance with the requirements
of the Companies Act 2006. As a consequence, some financial
information that is publicly available may become out of date and
will not necessarily be in complete accordance with the current
state of the business. The Directors will take all steps which they
consider reasonably necessary to ensure these risks are mitigated
as much as reasonably possible. Pending Admission of the New
Ordinary Shares and registration of Silverwood as a shareholder,
the Company will rely on the Lush Vendors to assist with its
regulatory disclosure obligations in relation to the Lush Sale
Shares.
Sonotas Acquisition
Terms of Acquisition:
Silverwood has conditionally agreed to acquire ("Sonotas
Acquisition") 90% of the total issued share capital of Sonotas
Holdings Corporation together with 100% of the total issued share
capital of Sonotas Corporation from Andrew Tone, a Director of the
Company and certain other sellers ("Sonotas vendors"). In addition,
Silverwood has entered into a put and call option arrangement ("Put
and Call Option") with Andrew Tone which entitles the Company to
acquire (or for him to require the Company to acquire) from him the
10% balance of the total issued share capital of Sonotas Holdings
("Option Shares") during the 6 month period commencing 48 months
from the date of completion ("Option Completion"). A summary of the
consideration and the further terms of the Sonotas Acquisition is
as follows:
On completion of the Sonotas Acquisition, Japanese Yen69,999,992
(approximately GBP417,000) in cash and Japanese Yen2,613,146,722
(approximately GBP15.6 million) in Silverwood shares will be paid
to the Sonotas vendors by Silverwood ("Sonotas Consideration
Shares"). The issue price of the Silverwood shares will be 95p per
share, being the closing price of a Silverwood share on the
business day immediately before this announcement. The Company has
also agreed to pay Andrew Tone a deferred payment in respect of his
shares in Sonotas Holdings of Yen341,103,296 (approximately GBP2.0
million), on or before 1 July 2023.
Completion, which is expected to take place in early January
2023, is subject (amongst other things) to the achievement of
certain minimum sales targets in December 2022 and for the cash
balances of the Sonotas group as at 31 December 2022 to be above a
stipulated amount. In addition, the Sonotas Acquisition is
conditional on admission of the Consideration Shares to trading on
the AQSE Growth Market. If Admission does not occur on or before 12
April 2023, the Company has the option to either extend the long
stop date or terminate the Sonotas Acquisition.
Upon the exercise of the Put and Call Option, the purchase price
for the Option Shares will be the sum of Japanese Yen275,749,989
(approximately GBP1.6 million), which will be settled through the
issue to Andrew Tone of new Silverwood shares at the mid-market
closing price on the business day before the exercise of the Put
and Call Option ("Issue Price").
Certain earn-out payments ("Earn-out Payments"), which shall
again be settled in Silverwood shares issued at the Issue Price,
will become due to Andrew Tone and certain Sonotas vendors, subject
to the Sonotas Group companies achieving demanding performance
criteria, as follows:
- 10% profitability with the SteamCream brand and a minimum 10%
compound annual growth rate in Japan over a 48 month period (the
"First Earn-out Payment"); and
- A 100% compound annual growth rate per year average over 48
months for sales outside of Japan (the "Second Earn-out
Payment").
The maximum amount of the First Earn-out Payment will be equal
to 100% of the revenue generated by the Sonotas companies in Japan
in the final 12-month period of the 48-month performance period and
the maximum amount of the Second Earn-out Payment will be equal to
300% of the revenue generated outside of Japan in the same period
(subject to maximum payment of GBP9 million).
Lock-In Agreement
As part of the Sonotas Acquisition, Andrew Tone has agreed to
enter into a lock-in and orderly market agreement with the Company
and VSA Capital at the time of completion of the Sonotas
Acquisition. Under the terms of the lock-in and orderly market
agreement, save for certain specific exceptions, Mr Tone has agreed
not to dispose of any interest he holds in the Silverwood shares
issued to him upon completion of the Sonotas Acquisition for a
period of 12 months from completion and then, for a further period
of 12 months thereafter, not to dispose of such shares unless it is
through the Company's broker from time to time, with a view to
maintaining an orderly market in the Company's Shares.
Related Party Transaction
Due to Andrew Tone being Executive Director of Silverwood, the
Sonotas Acquisition is deemed to be a related party transaction
pursuant to AQSE Access Rule 4.6 of the AQSE Rules for Companies.
The Company's directors (excluding Andrew Tone, who is directly
interested in the Sonotas Acquisition) consider, having exercised
reasonable care, skill and diligence, that the terms of the Sonotas
Acquisition are fair and reasonable insofar as the shareholders of
the Company are concerned.
Background to Sonotas:
The Sonotas companies comprising Sonotas Corporation and Sonotas
Holdings Corporation are headquartered in Japan and they
manufacture, sell, import and export skincare products. They
purchase raw materials in-house and outsources manufacturing
through external factories. Sonotas owns two brands Steamcream and
Cigarro. These brands are sold through wholesale sales at directly
managed stores, official online stores, limited-time shops,
limited-time shops at department stores and variety shops such as
Takashimaya, Mitsukoshi, and Daimaru. The Sonotas directors include
Andrew Tone (Managing director), and Shizuka Tagami.
Steamcream is a brand that manufactures skincare products using
a steam emulsification process that works to provide additional
protection and moisturise to skin. The Steamcream brand was
launched in 2007 and produced only one product during its first 8
years in business. To date, the business has sold over 10 million
units around the world and has evolved to eight product offerings
which include moisturising cream, UV heat masks, face cleanse and
lotion. Steamc ream use only the best vegan, naturally derived
ingredients and safe synthetics that restore & maintain healthy
balance for your skin. The moisturisers are hand made in Japan
using a Pure Steam Process, making it uniquely light and
delicate.
Cigarro is a men's self-care brand that uses high quality
products, natural ingredients and unique fragrances and formulas to
provide consumers with easy-to-use solutions that appeal to their
taste and character whilst simultaneously breaking down stigma
attached to male cosmetics. Cigarro's range includes products for
facial care, body care, fragrances, and towels.
Sonotas companies' sales for the financial year ending June 2021
fell to Japanese Yen1,116,958,000 (approximately GBP6.7 million),
however, overall profit for the financial year increased by around
15% to Japanese Yen31,308,000 (approximately GBP190,000).
At the same time, Sonotas companies' total assets increased by
Japanese Yen176,397,000 to Japanese Yen1,795,346,00 whilst net
assets grew by Japanese Yen31,308,000 to Japanese
Yen1,288,835,000.
Investment Rationale and Strategy:
The Directors believe that the Sonotas Acquisition represents an
opportunity to acquire a unique and scalable product range which
has considerable synergies with the Company's existing brands.
Sonotas has enjoyed substantial commercial success in Japan and the
Company believes this can be replicated in other markets around the
world. The Cigarro brand particularly is focused on one of the most
significant growth areas in cosmetics today; male grooming and
beauty, and the Directors believe that it is strongly positioned to
take advantage of this trend.
The Sonotas Acquisition will further provide the Silverwood
group of brands with an experienced team in Japan to manage the
introduction of our brands to the Japanese market.
Effect on Share Capital and Total Voting Rights
As a result of the Lush Acquisition, the total number of voting
rights in the Company as at the date of Admission will increase to
242,029,694 shares ("Total Voting Rights"). No shares are held in
treasury.
From the date of Admission, the Total Voting Rights figure may
be used by shareholders as the denominator to determine if they are
required to notify their interest in voting rights, or a change to
that interest, in the Company under the FCA's Disclosure Guidance
and Transparency Rules.
Directors Holdings and Concert Party Disclosure
Following completion of the Lush Acquisition the Directors will
have the following holdings in the Company:
Number of Post - Lush
shares proportion
of share
Directors' holdings capital
Andrew Gerrie* 235,126,407 97.15%
----------- -----------
Andrew Tone 104,572 0.04%
----------- -----------
Paul Hodgins 28,577 0.01%
----------- -----------
Tanith Dodge - -
----------- -----------
Joel Palix - -
----------- -----------
Sonia Hully - -
----------- -----------
*Andrew Gerrie's shareholding comprises shares held in his own
name and that of his wife, Alison Hawksley, as well as shares held
by Silver Americum Limited, a company in which Andrew Gerrie holds
a 20% stake and Alison Hawksley owns a 20% stake.
The Sonotas Acquisition is expected to complete in January 2023.
Following completion of the Lush Acquisition and the Sonotas
Acquisition, together with fee payments made in shares, the concert
party that was determined in consultation with the Takeover Panel
following the Balmonds acquisition in June 2022 and the investment
of Castelnau Group Limited ("Castelnau") in October 2022 will
change. The Concert Party will hold voting rights equivalent to
95.93% of Silverwood's total share capital:
Sonotas/Lush shareholding Proportion of share
Concert Party capital
--------------------------
Alison Hawksley & Andrew
Gerrie 232,844,280 90.10%
-------------------------- --------------------
Angus Thirlwell 571,429 0.22%
-------------------------- --------------------
Fushia Investments PTE
LTD 571,429 0.22%
-------------------------- --------------------
Andrew Monk 200,000 0.08%
-------------------------- --------------------
Andrew Tone 9,065,412 3.51%
-------------------------- --------------------
Paul Hodgins 28,577 0.01%
-------------------------- --------------------
James Wilson 28,572 0.01%
-------------------------- --------------------
Hu Yu 14,286 0.01%
-------------------------- --------------------
Jane Raca 7,500 0.00%
-------------------------- --------------------
Andrew Raca 5,000 0.00%
-------------------------- --------------------
Castelnau 2,285,715 0.88%
-------------------------- --------------------
VSA Capital 2,282,127 0.88%
-------------------------- --------------------
Total 247,904,327 95.93%
-------------------------- --------------------
Following the issue of the New Ordinary Shares in respect of the
Lush and Sonotas transactions, increasing the Concert Party's
shareholding in the Company to 95.93% of the Company's voting
rights, for so long as the Concert Party hold more than 50% of the
Company's voting share capital and its members are presumed to be
acting in concert, they may increase their aggregate interests in
the Ordinary Shares in the Company without incurring any obligation
under Rule 9 to make a mandatory offer for the remaining shares,
although individual members of the Concert Party, with the
exception of Andrew Gerrie and Alison Hawksley, would not be able
to increase their percentage interest in the Ordinary Shares of the
Company through 30%, or between 30% and 50%, without the consent of
the Panel.
Paul Hodgins, Non-Executive Director of Silverwood, said:
"I am delighted to announce the transactions relating to Lush
and Sonotas. Both are tremendously exciting companies with a vast
amount of growth potential. Silverwood is a rapidly growing
business, with a team of highly experienced independent directors,
and we are entrepreneurs ourselves. We have great respect for the
strong values and track records of both these highly
entrepreneurial companies. We look forward to engaging their
management to provide support and to add value where we can, and in
doing so also provide strong value to our own rapidly growing
shareholder group."
For more information, please contact:
Silverwood Brands plc
P aul Hodgins info@silverwoodbrands.com
--------------------------
VSA Capital - AQSE Corporate Adviser and Broker +44(0)20 3005 5000
--------------------------
Andrew Raca, Simba Khatai, Alexander Cabral (Corporate
Finance)
Andrew Monk, David Scriven, Peter Mattsson (Corporate
Broking)
--------------------------
Citigate Dewe Rogerson
Caroline Merrell, Noémie de Andia, Angharad
Couch
silverwood@citigatedewerogerson.com +44(0)20 7638 9571
--------------------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
NEXGPGBAPUPPGBG
(END) Dow Jones Newswires
December 12, 2022 02:00 ET (07:00 GMT)
Silverwood Brands (AQSE:SLWD)
Historical Stock Chart
From Jun 2024 to Jul 2024
Silverwood Brands (AQSE:SLWD)
Historical Stock Chart
From Jul 2023 to Jul 2024
