New Image Group Limited
Independent Adviser’s Report
In Respect of the Full Takeover
Offer by New Image Trustee
Statement of Independence
Simmons Corporate Finance Limited confirms that it:
• has no conflict of interest that could affect its ability to provide an unbiased report
• has no direct or indirect pecuniary or other interest in the NIT Offer considered in this report, including anysuccess or contingency fee or remuneration, other than to receive the cash fee for providing this report.
Simmons Corporate Finance Limited has satisfied the Takeovers Panel, on the basis of the material provided to the
Takeovers Panel, that it is independent under the Takeovers Code for the purposes of preparing this Independent
1. Introduction ............................... 1
2. Evaluation of the Merits of the NIT Offer .............................................. 5
3. Profile of New Image ..................17
4. Valuation of New Image ............... 38
5. Sources of Information, Reliance on Information, Disclaimer and Indemnity .................. 45
6. Qualifications and Expertise, Independence, Declarations and Consents ...................... 47
I. Comparable Company Transaction Multiples ................48
II. Comparable Company Trading Multiples .....................................50
1.1 New Image Group Limited
New Image Group Limited (New Image or the Company) develops, manufactures
and distributes health and nutritional products. Its main products are based on bovine colostrum and include weight loss packages, colostrum drinks, infant formula, skin care products and dairy products. The Company distributes its products throughout Asia, New Zealand, Australia and South Africa through its
direct selling channel (the Direct Selling business) and through selected retail
New Image is listed on the main board equity security market (NZSX) operated by
NZX Limited (NZX) with a market capitalisation of $63 million as at 11 February
2013 and unaudited total equity of $24 million as at 31 December 2012.
A profile of New Image is set out in section 3.
1.2 NIT Offer
New Image Trustee Limited (NIT) sent New Image on 17 January 2013 a notice ofintention to make a full takeover offer for all of the Company’s shares that it does not already hold or control.
NIT sent its Offer Document to New Image’s shareholders on 4 February 2013.
Number of Shares Sought
The NIT Offer is for all of the ordinary shares in New Image that NIT currently does not already hold or control.
NIT is offering cash of $0.26 for each New Image ordinary share.
The NIT Offer is conditional on NIT receiving sufficient acceptances such that NIT holds or controls 90.00% or more of the voting rights in New Image (the Minimum Acceptance Condition).
The NIT Offer is also subject to the satisfaction of the following conditions:
• no liquidator, receiver, receiver and manager, administrator, statutory manager or similar official is appointed.
• no event or circumstance occurs on or after the Notice Date (17 January 2013) which has a material adverse effect on New Image’s financial position, trading operations, assets or liabilities or prospects.
• no action, claim, litigation or proceedings is notified, threatened or commenced against New Image totalling in excess of $0.25 million.
• no temporary restraining order, injunction or other order is issued which makes the implementation of the NIT Offer void, unenforceable or illegal.
Any of the conditions, including the Minimum Acceptance Condition, may be waived by NIT at its discretion. However, the NIT Offer must always be conditional on NIT receiving sufficient acceptances such that NIT holds or controls more than 50% of the voting rights in New Image (as required under Rule 23(1) of the Takeovers Code (the Code)).
Change in Circumstances
The NIT Offer contains provisions that if there is a change in circumstances on or after 17 January 2013 that impacts on New Image’s shares and the offer is unconditional or becomes unconditional, then an adjustment will be made so as to ensure that the NIT Offer results in the same financial outcome for NIT as if the change in circumstance did not occur. The changes in circumstance relate to New Image :
• declaring, making or paying any dividend or any other distribution
• making any issue of shares, convertible securities or other securities of any
nature by way of bonus issue
• consolidating or subdividing its shares
• making any issue of equity securities to any person other than by way of bonus issue.
The offer is open from 1 February 2013 and closes at 5pm on 2 April 2013 (unless extended by NIT in accordance with the provisions of the Code).
Clegg Associates Shareholding
NIT is wholly owned by New Image’s founding chairman Graeme Clegg. Mr Clegg owns or controls 152,044,748 of the Company’s shares, representing 64.72% of New Image’s total shares on issue:
• 76,824,242 shares are held in his name (32.70%)
• 60,264,864 shares are held by Exotic-Corp Limited (Exotic), a company wholly owned by Mr Clegg (25.65%)
• 14,955,642 shares are held by NIT (6.37%).
We refer to Mr Clegg, Exotic and NIT collectively as the Clegg Associates.
Two other shareholders of the Company are associated with Mr Clegg:
• Alan Stewart is the Company’s deputy chairman. Mr Stewart holds 1,100,000
• HWM (NZ) Holdings Limited (HWM) is currently the 4th largest shareholder in
the Company (behind Mr Clegg, Exotic and NIT), holding 11,866,551 shares
(5.05%). HWM was formerly called Huljich Wealth Management (New
Zealand) Limited. It changed its name on 10 August 2011.
Collectively, the Clegg Associates, Mr Stewart and HWM hold 165,011,299 shares,