The share price of embattled health and wellness company Ascendis Health fell just over 4.5% on the JSE on Monday.
This was after the debt-laden small-cap announced it had secured majority shareholder approval at its AGM for an urgently needed recapitalisation to get it out of a R7.7 billion debt pile.
Despite the stock’s weakening on the back of an expected dilutionary effect of the equity raise on current shareholders, executives talked up the strong support for the move as a ‘vote of confidence’ in a newfangled firm.
“Ascendis Health shareholders today voted overwhelmingly in favour of the proposed group recapitalisation, paving the way for the implementation of the transaction to settle debt of approximately €444 million [R7.7 billion] owed to senior lenders,” the group noted in a media statement.
“A total of 98.5% of shareholders voted in favour of the recapitalisation, exceeding the required 75% threshold.
“Shareholders representing over 47% of the company’s issued shares voted at the general meeting. Shareholders also supported the transactions for the disposal of the Animal Health and Respiratory Care Africa [RCA] businesses,” Ascendis added.
The group’s CEO Mark Sardi welcomed the strong vote of confidence from retail and institutional shareholders, following months of negotiations with the senior lenders.
“We now have the required mandate from our investors and will implement plans to unlock shareholder value in the ‘new’ Ascendis Health in the shortest time possible,” declared Sardi.
Moneyweb reported in early September that Ascendis is spending more than R290 million in legal fees and transaction costs related to the recapitalisation plan, including costs linked to the disposals.
At the time, these costs were more than the group’s market capitalisation of around R274 million.
However, the group’s market cap has increased since then to around R323 million on the back of optimism around securing support for the recapitalisation and Ascendis last week posting an improved full-year financial performance of its continuing operations.
Ascendis reported that in the year to June 2021, normalised Ebitda (earnings before interest, taxes, depreciation, and amortisation) from total operations increased by 18% to just over R1.44 billion.
Ebitda from continuing operations, being the remaining South African assets, increased by 120% to R14 million, from a loss of R70 million in its prior financial year.
According to Ascendis, if shareholders had not supported the group recapitalisation transaction, the senior lenders would have been entitled to enforce their security rights by taking control of the group’s European assets and placing the South African assets in business rescue.
The ‘new’ [post-recapitalised] Ascendis Health comprises three local businesses: Medical Devices, Pharma and Consumer Health.
“Following the approval of the transaction, certain of the group’s assets will now be transferred to the lenders in exchange for existing debt obligations. The lenders will provide new debt facilities to the group,” it said.
Ascendis pointed out that its lenders will take 100% ownership of Remedica (Cyprus) and Sun Wave Pharma (Romania), while they will also receive the net disposal proceeds from the sale of Animal Health and RCA.
“The lenders will provide a two-year loan facility to Ascendis Health of €15 million and a new loan facility of €20 million to fund remaining transaction costs, head office restructuring costs and working capital requirements. The facility will provide liquidity to optimise the value of the ‘new’ Ascendis Health,” it further highlighted.
Ascendis Health has also shared in the upside on the disposal of Farmalider, together with exclusive access to Farmalider’s product portfolio.
“Our Pharma division will gain access to all Farmalider products, 40 of which have been identified for commercialisation. This licensing agreement grants the Pharma division indefinite and exclusive access and rights to market Farmalider’s portfolio of products for 14 Southern African Development Community countries, including South Africa, and 11 other African countries,” Sardi said.
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