Promisia enters Agreement to acquire Aged Facilities

Promisia enters Conditional Agreement to acquire Aged Care Facilities for $31.3m Highlights o Promisia to acquire Ranfurly Manor and Nelson Residential Care Centre in Feilding and Eileen Mary Residential Care Centre in Dannevirke. o Promisia to acquire a long term lease of Aldwins House in central Christchurch with a view to opening it as a rest home/hospital in 2020. An option to purchase the property from interests associated with Mr. Ian Cassels of the Wellington Company is included in the acquisition. o The acquisitions will transform Promisia into a retirement village and aged care sector operator. o Indicative terms agreed for debt finance of $17.3m. o New equity issuances proposed of $8m to the vendor and $6-$8m to various private placement participants, all at 0.1c per share. o Subject to NZX and shareholder approvals, completion expected in first quarter of 2020. Background Promisia Integrative Limited (NZX:PIL) (Promisia) is pleased to advise that it has entered a conditional agreement to acquire three aged care facilities and a lease of a fourth facility with an option to purchase. The vendor is the Brankin Family Trust (Brankin Trust), a trust associated with Promisia director Mr. Tom Brankin. Shareholders will be well aware of the regulatory difficulties that Promisia has faced in relation to Arthrem which have severely impacted sales and jeopardised the ability for the company to operate. Due to these factors, the Board has been exploring new opportunities to leverage the NZX listing of Promisia and introduce a profitable business that is resilient and scalable. The intention is to complete this transaction and cease operating the natural remedies business. The Facilities The Board believes that a move into the aged care sector will provide PIL with stable cash flows, sustainable profits, and growth through new developments and acquisitions. Under the agreement for sale and purchase Promisia will acquire companies that own the following three aged care facilities: o Ranfurly Manor, located in Feilding; o Nelson Residential Care Centre, located in Feilding; and o Eileen Mary Residential Care Centre, located in Dannevirke. The above facilities are all profitable with consolidated FY March 2019 revenue of $12.7 million and EBITDA of $2.4 million. In addition, a further company will be acquired from the Brankin Trust which holds a long term lease of a substantial property at 62 Aldwins Road, Christchurch, known as Aldwins House. Aldwins House, operated formerly as an aged facility but was damaged severely in the Christchurch earthquake. It has recently undergone substantial strengthening and refurbishment work. Subject to final consents it is expected to open as a 147 bed rest home and hospital in the first half of 2020. The land and buildings being acquired have development opportunities associated with them. Resource and building consents are already in place for construction of a $14 million retirement village adjacent to Ranfurly Manor in Feilding. An arrangement for Mr. Brankin's interests to fund this development has been agreed in the sale and purchase agreement. The facilities and this development opportunity are described further in the Appendix to this announcement. Purchase Price and Finance The purchase price payable to Brankin Trust for the facilities is approximately $31.3m. Promisia intends to finance the purchase price through a mixture of debt and equity as follows: o Bank debt finance of $17.3 million. This debt will be supplemented with a working capital facility of $1,000,000 and an acquisition facility of $400,000 to fund transaction costs. At present Promisia has indicative terms for this lending but it is subject to further conditions and entering legal documentation before it is committed. o $8 million of the purchase price being paid to Brankin Trust in new shares at 0.1c per share. These shares will be escrowed and released progressively over a two year period. o Placements to high net worth and wholesale investors of $6 million to $8 million at 0.1c per share. At present Promisia has legally binding commitments to subscribe for greater than $4 million of new capital in the placements and needs to secure at least $6m to satisfy funding requirements for the transaction. Conditions Promisia is at an advanced stage of preparing a notice of meeting and listing profile for the transaction. Simmons Corporate Finance Limited has been appointed to prepare an independent report for the transaction under the Listing Rules and the Takeovers Code. These documents are expected to be submitted to the relevant regulators by Christmas with a view to being issued to shareholders in early February. The transaction is conditional on these documents being approved by all applicable regulators. When that documentation is approved it will be announced and sent to all shareholders with advice as to the shareholder meeting date and location. The transactions are conditional on shareholders approving the transactions at that meeting. As noted above, the transaction is further conditional on Promisia reaching final, committed terms for its debt finance and securing a further $1.5 million of equity placements. In addition, there is a condition for Aldwins House to obtain contractual approval from the Canterbury District Health Board. Promisia will update the market with progress as these conditions are satisfied. Suspension of Trading In accordance with NZX practice in reverse listing transactions, shares in Promisia will be suspended on the NZX market from today until the shareholder documentation described above is released and the market can be informed on all facets of the transaction. Share Purchase Plan (SPP) The Board is committed to giving all shareholders the ability to invest in this change of direction at the same price as new investors. Shareholder approval will be sought to authorise the Board to offer to all shareholders the opportunity to participate in a share purchase plan in the next 12 months where shareholders can, subject to scaling, acquire up to $15,000 of shares in Promisia at 0.1c per share. The SPP offer is intended to be made in 2020 after completion has occurred and periodic financial information has been released to NZX in accordance with the NZX Listing Rules. It is likely that around that time Promisia will also undertake a share consolidation. Management Chief Executive Rene de Wit will continue in his role and operational management of all the facilities will remain under the management of General Manager Virginia Dyall-Kalidas. For further information please contact Mr Stephen Underwood, Chairman on 027 499 3387 or Mr Rene de Wit on 021 571 000. ENDS End CA:00346241 For:PIL Type:TRANSACT Time:2019-12-19 08:30:38