Key highlights:
- Health House International Limited has signed a binding term sheet with Zelira Therapeutics Ltd for Zelira to acquire Health House
- Agreement is conditional upon Zelira’s completion of satisfactory due diligence on Health House and the parties entering into a formal Scheme Implementation Deed, amongst other standard conditions.
- The acquisition will be undertaken by a Scheme of Arrangement pursuant to Part 5.1 of the Corporations Act 2001 (Cth).
- Zelira has agreed to provide a $1.5 million loan facility to Health House to assist with its working capital requirements prior to implementation of the Scheme.
- CPS acting as corporate advisor for Health House
Health House International Ltd (ASX:HHI) (Health House or the Company), an international pharmaceutical distributor specialising in the distribution of medicinal cannabis products across Australasia, the United Kingdom and Europe, is pleased to announce that it has entered into a binding term sheet with Zelira Therapeutics Limited(ASX: ZLD) (‘Zelira’), under which it is proposed that Zelira will acquire 100% of the shares in Health House by way of a Scheme of Arrangement to be undertaken by Health House (the ‘Scheme’).
The Scheme will be subject to shareholder and Court approval in accordance with the requirements of Part 5.1 of the Corporations Act 2001 (Cth).
Under the Scheme, Zelira will issue shares to Health House shareholders giving Health House parties a 19.45% interest in the expanded capital of Zelira.The proposed merger of Health House with Zelira will create a global organisation with strong medicinal cannabis product and distribution capabilities.
Zelira is a leading global biopharmaceutical development and commercialization company marketing cannabinoid-based medicines. Zelira owns a portfolio of proprietary revenue-generating products and a pipeline of candidates undergoing clinical development that are positioned to access the world’s largest and fastest-growing markets.
Zelira is focused on developing and clinically validating branded cannabinoid-based medicines for the treatment of a variety of medical conditions in its Rx business, including insomnia, autism and chronic non-cancer pain as well as offering over-the-counter (OTC) products.
Zelira is also generating revenue in Australia and Germany from its proprietary and patented Zenivol® – a leading cannabinoid-based medicine for treatment of chronic insomnia.
Zelira has partnered with SprinJene® Natural to develop and commercialise natural and organic oral care products under the SprinjeneCBD brand, as part of Zelira’s OTC business.
CPS Capital Group Pty Ltd is acting as Health House’s corporate advisor for the proposed merger.
Health House Founder & Chairman David Wheeler said: “The proposed merger is a strategic vertical opportunity to increase margins and save costs given:
- Health House currently distribute Zelira’s Rx formulations in Australia and have an agreement in place to distribute the SprinjeneCBD toothpaste in the United Kingdom.
- Manufacturing to be completed in house to further improve margins for the combined groups products and providing stronger control of product life cycle.
- Zelira’s research team and Health House’s European based Kalapa Clinic will provide an opportunity to materially improve the speed at which these products can obtain clinical validation, while improving the cost of such clinical trials.
The $1.5 million short-term loan facility assist Health House with its short-term working capital requirements.”
Structure of proposed acquisition
Zelira and Health House have executed a binding term sheet pursuant to which they will undertake the steps required to enter into a formal Scheme Implementation Deed (‘SID’), subject to satisfactory due diligence by Zelira on Health House.
The SID will be subject to the conditions precedent set out in Annexure 1.
Facility Deed
To assist Health House with its short-term working capital requirements, Zelira has agreed to provide a $1.5 million short-term loan facility to Health House on the following terms:
- the maximum amount of the facility is $1.5 million and may be drawn down in a single drawdown or in a series of drawdowns.
- The facility may only be used for Health House’s short-term working capital requirements.
- The facility is unsecured.
- The facility is repayable on the earlier of:
- the date that Zelira and Health House agree after Health House becomes a wholly-owned subsidiary of Zelira as a result of the Scheme;
- the date that is 2 months after the date the parties’ current confidentiality deed between the parties is terminated or expires without the SID being executed;
- the date that is 2 months after the date the SID is terminated; andothe date that is 2 months after the Scheme is implemented.
Debt to Equity swapTo provide further support and reduce the working capital requirements of the combined group, Health House will seek shareholder approval for the issue of shares as repayment of approx. $1.5 million owing to CanPharma lenders (debt consideration shares), which shares will be Scheme shares for the purposes of the Scheme.
