Me Today – Notice of Special Meeting
Me Today Limited
Notice of Special Meeting
9, June 2021
Dear shareholders,
Proposed acquisition of King Honey and associated funding arrangements
Introduction
On 31 May 2021, Me Today Limited (the Company or Me Today) announced that its subsidiary Me Today
Manuka Honey Limited (the Purchaser) had entered into a conditional agreement to buy an additional
business, King Honey Limited (King Honey).
The agreed purchase price is $36 million, to be satisfied by a payment of $21 million in cash, $10 million of
new shares in the Company and the issue by the Purchaser of a subordinated 3 year note for $5 million.
In addition, the Company plans to raise $15.75 million additional capital from third party investors,
(Capital Raise). On 2 June 2021, Me Today advised NZX that it had conditionally placed $10 million of the
Capital Raise with financial market participants and other wholesale investors. The Company intends to
make a retail o er to existing shareholders and other members of the public in New Zealand soon after
publication of this notice of meeting. Further details on how to participate in that o er will be advised to
NZX by market announcement and directly to eligible shareholders shortly. The cash component of the
purchase price is intended to be funded by part of the Capital Raise proceeds and bank debt.
Accompanying materials
Accompanying this letter is a Notice of Special Meeting of shareholders of the Company, for a meeting to
be held at Events on Khyber, Level 2, 155 Khyber Pass Road, Grafton, Auckland 1023 on Friday 25 June
2021, commencing at 12pm.
In addition, the Company’s board of directors commissioned an Independent Report in respect of the
Acquisition of King Honey Limited from Simmons Corporate Finance dated June 2021. A copy of that
report also accompanies this letter for shareholders to review in conjunction with their consideration of
the notice of meeting.
Board recommendation
The board unanimously recommends shareholders vote to approve all resolutions set out in the notice of
meeting.
The acquisition is expected to drive further growth in the group by expanding into a complementary
product line, is fully aligned with the existing health, lifestyle and wellbeing focus and values of the
Company, and the board commends it to you for your consideration and support.
Yours sincerely
Grant Baker
Chairman
Notice of special meeting of shareholders
1. Acquisition of King Honey –
Ordinary Resolution – Listing
Rule 5.1.1
To consider and, if thought fit, pass the following resolution as an ordinary
resolution of the Company:
“To approve the acquisition of King Honey Limited by the Company’s
subsidiary, Me Today Manuka Honey Limited (the Purchaser), for a total
purchase price of $36 million to be satisfied by payment of $21 million cash,
an issue of $10 million in new shares in the Company, and the issue by the
Purchaser of a 3 year subordinated note for $5 million, as described further in
the explanatory notes to the notice of meeting.”
Implementation of this resolution is conditional upon all of resolutions 1 to 3
being approved by the shareholders of the Company.
2. Issue of shares to King Honey
vendors – Ordinary Resolution -
Listing Rule 4.1.1
If resolution 1 is passed, to consider, and if thought fit, pass the following
resolution as an ordinary resolution of the Company:
“To approve the issue of 113,636,364 fully paid ordinary shares to Terrence
Wayne Jarvis and Jarvis Burnes Trustee Limited as trustees of the TW Jarvis
Family Trust at an issue price of 8.8 cents each in part satisfaction of the
purchase price for the King Honey acquisition, with such shares to rank
equally with existing shares in the Company, as described further in the
explanatory notes to the notice of meeting."
Implementation of this resolution is conditional upon all of resolutions 1 to 3
being approved by the shareholders of the Company.
3. Issue of Capital Raise shares
to investors – Ordinary
Resolution – Listing Rule 4.1.1
If resolution 2 is passed, to consider, and if thought fit, pass the following
resolution as an ordinary resolution of the Company:
"To approve the issue of 178,977,273 fully paid ordinary shares to subscribers
in the capital raising being undertaken in conjunction with the King Honey
acquisition at an issue price of 8.8 cents each, with such shares to rank
equally with existing shares in the Company and provided that MTL Securities
Limited and its directors are not eligible to participate, as described further in
the explanatory notes to the notice of meeting.”
Implementation of this resolution is conditional upon all of resolutions 1 to 3
being approved by the shareholders of the Company.
Notice is given that a Special Meeting of Shareholders of Me Today Limited (the Company) will be held at Events
on Khyber, Level 2, 155 Khyber Pass Road, Grafton, Auckland 1023 on Friday 25 June 2021 commencing at 12pm.
The Explanatory Notes which accompany this Notice of Meeting set out the details of the transactions which are
the subject of the resolutions and the approval required for each resolution under the NZX Listing Rules
(the Listing Rules).
Business of the meeting
NOTES
1. Explanatory Notes
A general overview of the King Honey acquisition and explanatory notes for resolutions 1 to 3 are set out in the
following pages. Additional information about the King Honey acquisition and the associated approvals are set
out in the Independent Report in respect of the Acquisition of King Honey Limited from Simmons Corporate
Finance dated June 2021 that accompanies this document.
2. Proxies
All shareholders of the Company entitled to attend and vote at the meeting are entitled to appoint a proxy to
attend and vote for them instead. A proxy need not be a shareholder of the Company.
The Chairman of the meeting or any other director can be a proxy for a shareholder if a shareholder wishes to
appoint the Chairman or director as their proxy through the proxy form. The Chairman and the directors intend to
vote any undirected proxies in favour of all of the resolutions.
A proxy form is enclosed. To be e ective, appointments of a proxy should be lodged at least 48 hours before the
meeting is due to begin (i.e. before 12pm on Wednesday 23 June 2021), in accordance with the instructions in the
notes to the accompanying proxy form.
3. Voting Restriction
As at the date of this notice, Terrence Wayne Jarvis and Jarvis Burnes Trustee Limited as trustees of the TW Jarvis
Family Trust (the Vendors) are not shareholders of the Company. In any event, the Vendors and any Associated
Person (as that term is defined in the Listing Rules) of them, are not entitled to vote on resolution 2.
Any wholesale investor that is a party to a subscription agreement with the Company in the Capital Raise, or their
Associated Person(s) (as defined in the Listing Rules), is not permitted to vote on resolution 3.
Persons subject to a voting restriction may not be appointed as a discretionary proxy (but can be appointed as a
non-discretionary proxy and expressly directed how to vote if appointed by a person who is not disqualified from
voting).
All persons registered on the Company’s register of shareholders as the holders of shares as at 5pm on
Wednesday 23 June 2021 shall, subject only to the preceding restrictions, be entitled to vote at the Meeting in
person or by proxy.
4. Conditional nature of resolutions 1 – 3
Implementation of resolutions 1 to 3 are conditional upon all of resolutions 1 to 3 being approved by the
shareholders of the Company.
By Order of the Board of Directors
Stephen Sinclair
Company Secretary
Explanatory notes
Summary of transactions
On 31 May 2021, the Company announced that the Purchaser had entered into a conditional agreement to buy
King Honey.
The agreed purchase price is $36 million, to be satisfied by a payment of $21 million in cash, $10 million of new
shares in the Company and the issue by the Purchaser of a subordinated 3 year note for $5 million.
In addition, the Company plans to raise $15.75 million additional capital from third party investors (Capital
Raise).
The cash component of the purchase price is intended to be funded by part of the Capital Raise proceeds, and
bank debt.
King Honey business overview
King Honey is one of New Zealand’s premium Mānuka honey producers. King Honey began operations in 2016
with a vision to bring highly skilled beekeepers together to develop a fully integrated Mānuka honey brand. Until
2018, King Honey primarily accumulated high quality honey with limited third party brand exports to China and
Europe.
In 2018, King Honey developed and launched the BEE+ brand (including website, packaging and printing) for use
with its honey products. Since 2018, as discussed in more detail below, King Honey has continued to source
premium Mānuka honey from its own hives, produces premium bottled honey at its own plant and currently
arranges for the sale and distribution of its premium products under the BEE+ and Superlife brands.
King Honey has the capacity to produce more than 350 tonnes of honey from over 18,000 hives, and 3,600 queen
bee rearing hives, placed across the North Island and the Marlborough region. King Honey has licences and
other commercial arrangements to locate hives on land of over 100 landowners covering around 900 hive sites.
King Honey has five leased apiary facilities located in Kaitaia, Kerikeri, Turangi, Marlborough and Masterton.
These facilities are used for sta operations, storage of equipment, and maintenance of hives and components
year-round (e.g. pallets and boxes).
All beekeeping operations are overseen by employed NZ Apiary Managers. There are 5 regional managers and
45 highly skilled employed beekeepers in total.
King Honey has two queen bee rearing operations, located in Kerikeri and Marlborough, employing 13 sta .
These operations are on leased property.
Once extracted, honey is located in drums and given a batch and drum number. Each drum is tested by King
Honey’s own laboratory called Agritest for compliance with industry and regulatory standards, who also
undertake testing for other dairy farmers and beekeepers.
Overview of proposed King Honey acquisition
Introduction
The special meeting of shareholders of Me Today Limited (the Company) is being called for the purpose of
considering resolutions to approve the proposed acquisition by the Company’s subsidiary, Me Today Manuka
Honey Limited (the Purchaser), of King Honey Limited (King Honey) from Terrence Wayne Jarvis and Jarvis Burnes
Trustee Limited as trustees of the TW Jarvis Family Trust (the Vendors) and associated matters.
Agritest was developed in 2019 as the company saw the need for a specialised honey testing laboratory that tests
for key indicators such as MGO (a compound in Mānuka honey), DHA (a chemical compound which slowly
converts to MGO over time) and UMF (Unique Mānuka Factor –which describes the antibacterial property of
Mānuka honey). UMF ratings generally range from 5 to 20; the higher the UMF factor, the higher the price.
King Honey has a processing plant, bottling and storage facility, located in Taupo, with 27 operating sta . The
plant has capacity to bottle more than 60 tonnes of product per month. King Honey owns the production
equipment and the buildings are leased.
King Honey has a leased head o ce located in Auckland with 3 sales, and 4 finance sta . The premises are
currently leased on commercial terms from the vendor on a rolling monthly basis. Me Today will look to terminate
this lease and relocate sta to new o ces.
The BEE+ and Superlife Mānuka honey brands are sold domestically in NZ, in China, the US and other
international markets. In addition to these brands King Honey provides contract manufacturing services for other
independent honey brands utilising its Taupo production facility. The business currently operates two brands –
the established BEE+ brand, and the Superlife brand which was launched in 2020. The BEE+ brand is owned by
a joint venture company called Bee Plus Brands (China) Limited (BPB), 15% of which is owned by King Honey with
the remaining 85% owned by Access Brand Management Pty Limited (ABM) – an Australian operated, Chinese
owned, brand development, marketing and distribution company.
King Honey wholly-owns the Superlife brand. Superlife branded honey is sold online from
https://superlifemanuka.co.nz/. Me Today intends to launch online sales of Superlife branded products in North
America upon acquisition.
Management arrangements
King Honey has a strong management team overseeing the 75 people employed nationwide. Terry Jarvis is the
current CEO. After completion, it is intended that Terry Jarvis will transition away from the day-to-day running of
the business. King Honey’s existing management team will report to Me Today director Stephen Sinclair, who will
take on the role as general manager of King Honey, with Terry available for consultation. Terry Jarvis’s interests
retain a significant shareholding, ensuring that Terry remains committed to the future success of the business.
Land Access
King Honey holds licences (or has other commercial arrangements) with over 100 landowners covering
approximately 900 hive sites. King Honey has targeted Mānuka dense areas by mapping large parts of the North
Island by utilising GPS and aerial mapping techniques through partnering with an aviation company.
King Honey and ABM
King Honey and ABM have a long term arm’s length distribution agreement with ABM’s owner, Houpu Limited
(Houpu), relating to the BEE+ branded product which enables the product to be distributed by Houpu through
ABM exclusively in China through a substantial network. The distribution agreement is on normal commercial
terms.
As noted above, the BEE+ brand created by King Honey is now owned by BPB (of which 85% is owned by ABM
and 15% by King Honey). The BEE+ brand was transferred by King Honey to BPB as part of a negotiated
expansion of the distribution agreement arrangements with Houpu in May 2019. In practice management of the
BEE+ brand is undertaken by ABM. King Honey performs the new product development function under oversight
from ABM for the BEE+ brand. King Honey does not earn revenue or a royalty from the brand rather it receives a
margin under the distribution agreement.
ABM is a multi-level marketing company representing a number of well-known brands. It was established in
Australia and has o ces in Sydney, Melbourne and Auckland. Its head o ce is now in Hangzhou with over 1,000
employees. It employees over 100 people in Australia.
Me Today will expand its existing lifestyle, health and wellness businesses by acquiring King Honey, a
complementary business operating in an adjacent segment. The rationale for the transaction includes:
BEE+ is the only honey brand represented by ABM. Since the partnership commenced in May 2019, ABM has
purchased NZD$21 million worth of product. ABM sales accounted for 70% of King Honey’s revenue in the 2021
financial year. In addition to premium bottled honey product, King Honey has developed lozenges, snap packs
supplements and high UMF new products to be branded BEE+ for distribution through ABM’s network. Under the
terms of the distribution agreement ABM cannot source Mānuka Honey from suppliers other than King Honey.
King Honey is generally free to sell other branded honey products elsewhere. As discussed below, Me Today
plans to develop Me Today branded premium honey products.
Access to new markets:
King Honey is already established in key target markets
The acquisition supports Me Today’s international growth ambitions
Increased customer base and cross-sell opportunities:
Overlap in target customer audience
Access to a new customer base
Enhancement of o ering to existing customers which provides cross-selling opportunities
Growth through core range and new product development:
Provides capability to launch honey products with the Me Today brand (e.g. Vitamin C infused with Mānuka
Honey)
Use of Me Today’s tried and tested new product development programme to extend and tailor the King
Honey Product range (see discussion below)
Strong strategic and premium brand alignment:
King Honey is an established company in an adjacent category within the health and wellness space
Operational since 2016
Vertically integrated operations and production
Robust financial profile:
Revenue: $16.5 million (FY21)
FY21 EBITDA $3.8 million: (an increase of $1.5 million in the past 12 months)
Higher growth forecast for FY22
Realise revenue and cost synergies:
Ability to leverage both businesses distribution networks and production channels
Increased buying power packaging materials
Me Today utilises an internal tried and tested approach to new product development. The 6 steps to this
approach are: Idea, Research, Formulation, Test, Launch, and Continual Testing. Me Today engages with
internal experts as well as liaising closely with its contract manufacturing partners to bring to life each new
product. Additionally, the business also engages external regulatory consultants where appropriate. Me Today
has utilised this approach since inception with 8 supplements and 12 skincare products launched in the first 12
months, and since then has also launched a further 9 supplements, 4 vitamin serums, 2 oils and natural
sunscreen.
Rationale for the acquisition
Key terms of the acquisition
Funding of the acquisition
On 31 May 2021, the Purchaser (as buyer), the Company (as guarantor), the Vendors (as seller) and Terry Jarvis (as
covenantor) entered into an Agreement for Sale and Purchase of Shares in King Honey Limited (the Acquisition
Agreement).
Completion of the Acquisition Agreement is conditional upon:
Shareholder approval of the acquisition and allotment of shares to the Vendors (which are being sought at the
special meeting of shareholders);
Completion of the Capital Raise; and
The Company and the Vendors receiving consent from certain third parties on terms satisfactory to the Purchaser
(acting reasonably).
The Company is aiming for satisfaction of all conditions promptly following the special Meeting, and to then
complete the acquisition on 30 June 2021.
The consideration payable under the Acquisition Agreement is as described in the “Summary of Transaction” above
and in more detail under the heading “Funding of the acquisition” immediately below.
The Company engaged PwC and Chapman Tripp to perform financial and legal due diligence, respectively. The
consideration was negotiated with the Vendors having considered the future earnings potential, and represents a
multiple of approximately 6.8 times budgeted FY22 EBITDA.
Section 5 of the accompanying Independent Report in respect of the Acquisition of King Honey Limited from
Simmons Corporate Finance dated June 2021 (Independent Report) contains an independent valuation of King
Honey. Simmons Corporate Finance assess the value of King Honey’s equity (on a debt free / cash free basis) to be
in the range of $35.4 million to $40.5 million as at the present date.
A significant element of the consideration is being satisfied by the issue of shares in the Company subject to transfer
restrictions, which aligns the interests of the Vendors with those of the Company and its shareholders.
The Acquisition Agreement contains customary commercially negotiated warranties and certain specific
indemnities to address matters identified in due diligence investigations undertaken by the Company and its
advisers while negotiating the acquisition.
Terry Jarvis has agreed to a restraint of trade and provided non-solicitation undertakings for a period of 7 years
from completion on usual arm’s length terms.
The $21 million cash component of the purchase price is intended to be funded by $12.5 milion of the Capital Raise
proceeds, $8.5 million of bank debt, and the remaining purchase price will be satisfied by an issue of $10 million of
shares in the Company to the Vendors and the issue of a $5 million subordinated note by the Purchaser to the
Vendors.
The approximately $3.25 million balance of the Capital Raise proceeds will be applied to transaction costs and for
use in the existing Me Today business.
Capital Raise
In conjunction with the acquisition, the Company
plans to raise $15.75 million additional capital from
third party investors by the issue of 178,977,273 new
shares at an issue price of 8.8 cents per new share
(Capital Raise).
The Company has mandated investment bank CM
Partners to arrange the Capital Raise. Following
announcement of the acquisition, CM Partners sought
binding commitments from third party subscribers to
participate in the Capital Raise. On 2 June 2021, Me
Today advised NZX that it had conditionally placed
$10 million of the Capital Raise with financial market
participants and other wholesale investors.
In addition the Company intends to o er $5.75 million
of the Capital Raise to existing shareholders and
other members of the public in New Zealand soon
after publication of this notice of meeting through a
general retail o er, incorporating a share purchase
plan to existing shareholders. Further details on how
to participate in the retail o er will be advised to NZX
by market announcement and directly to eligible
shareholders shortly. The retail part of the Capital
Raise will not close prior to the shareholder meeting.
In the event of oversubscriptions in the retail o er, the
Company reserves the right to place additional
capital under listing rule 4.5.1 (15% Placements)
and/or to scale any oversubscriptions in the retail
o er with a preference in favour of existing
shareholders.
The shareholder approval sought covers both the
shares proposed to be issued to the committed
wholesale investors and to retail investors (including
through the shareholder purchase plan).
The Company’s majority shareholder, MTL Securities
Limited and its directors (who are also directors of
the Company) and their Associated Persons (as
defined in the listing rules), are not eligible to
participate in the Capital Raise. The reason for this is
that Me Today wishes to broaden the Company’s
shareholder base, does not wish to seek related party
transaction approval at the shareholders’ meeting,
and MTL Securities Limited wishes to be able to vote
in favour of the resolutions (if MTL Securities Limited
was eligible to participate in the Capital Raise,
because of its association with directors Grant Baker,
Stephen Sinclair and Michael Kerr, it would not be
permitted to vote on resolution 3).
Bank debt
The Company has received confirmation from Bank of
New Zealand that it has committed to provide a bank
facility for the Purchaser to borrow $8.5 million in
connection with the acquisition.
The committed facility has a term of 5 years and is on
commercial terms. The Company and its subsidiaries
(including the Purchaser) will grant Bank of New Zealand
first ranking security over their assets to support the
facility.
In addition to the new $8.5 million BNZ acquisition
facilities, Bank of New Zealand provide overdraft facilities
to Me Today and the Company incurs trade creditors in
the normal course of business.
Vendors share issue
In addition, the Purchaser and the Company have
agreed, subject to shareholder approval, for the
Company to issue 113,636,364 new shares in the Company
at an issue price of 8.8 cents per share (raising $10 million
new equity in total), in part satisfaction of the purchase
price. The new shares will be issued on the same terms,
and rank equally with, the existing shares in the
Company.
The Vendors have agreed that 50% of the new shares
issued will be subject to transfer restrictions for one year,
and 50% subject to transfer restrictions for two years,
following completion of the acquisition. These transfer
restrictions are subject to exceptions if the Company
gives its written consent or to enable the Vendors to
accept a takeover o er or to participate in a scheme of
arrangement in relation to the Company’s shares.
Subordinated Note
The remaining $5 million consideration payable for the
acquisition will be satisfied by the Purchaser issuing the
Vendors a subordinated note (the Subordinated Note).
The Subordinated Note will carry interest at 4% per
annum, payable annually in arrears, and have a term for
repayment of 3 years following completion of the
acquisition. The terms of the Subordinated Note do not
provide for conversion into equity (it is repayable in
cash).
The Purchaser has agreed to grant the Vendors second
ranking security (behind Bank of New Zealand) and to
procure King Honey to guarantee the Note from
completion.
Financial impact of the acquisition
Overview
Sections 3.5 and 3.6 of the Independent Report sets out a summary of the recent financial performance and
financial position of Me Today. Sections 4.6 and 4.7 of the Independent Report sets out similar information for King
Honey.
The table below summarises the pro forma financial performance and financial position of the combined
businesses assuming the King Honey acquisition as at 31 March 2021 as if the King Honey acquisition and the Capital
Raise had been completed, and the Bank of New Zealand acquisition finance had been drawn.
The King Honey financial information shown above is extracted from management accounts – these are not
publicly available. Following acquisition, the Company will di er from the unaudited and pro forma financial
information above as the King Honey assets and liabilities will need to be accounted for on a fair value basis and
IFRS adjustments will need to be made (see the Appendix to this notice of meeting).
At completion, it is expected that King Honey will have in excess of $16 million in working capital. This includes
inventory at cost comprising approximately 540 tonnes of premium Mānuka honey. The network of hives has
capacity to produce in excess of 350 tonnes of honey annually.
On 31 March 2021, Me Today advised the market that it expected forecast revenue for the financial year ended 31
March 2022 to exceed $3 million. King Honey’s budgeted revenue for the 31 March 2022 financial year is around
$21.5 million.
While the existing Me Today business is continuing to grow and further develop its brand and market presence, the
existing business is expected to continue to incur an EBITDA loss in the 31 March 2022 financial year of around
$3.3m.
King Honey is budgeted to derive EBITDA of around $5.26 million for the 31 March 2022 financial year.
Further commentary on the financial performance of the King Honey business is set out in section 4.8 of the
Independent Report.
The King Honey budgeted revenue and EBITDA should also be considered with the risk factors arising from the
acquisition discussed below.
Combined
(Pro Forma)
$000
Impact of
Acquisition & Funding
$000
King Honey
(Unaudited)
$000
Me Today
(Audited)
$000
Revenue
Earnings before interest, tax,
depreciation and amortisation
(EBITDA)
Net profit / (loss) for the year
Total assets
Total liabilities
Net assets/equity
1,143
(2,891)
(2,860)
6,714
(822)
5,892
16,515
3,868
2,289
26,411
(2,110)
24,301
N/A
N/A
N/A
14,199
(13,500)
699
17,658
977
(571)
47,324
(16,432)
30,892
Note: As is common with closely held companies, to date King Honey’s financial statements have not been prepared in accordance with
New Zealand generally accepted accounting practice and recognises inventory at cost rather than valuing honey inventory at fair value as
required under NZ IAS 41 Agriculture. Further detail on the impact of IFRS is discussed in the Appendix to this notice of meeting.
The principal assumptions to the King Honey budgeted FY22 financial information discussed above are as follows.
Revenue
Revenue is assumed to increase 30% from $16.5 million to $21.5 million. The key components of this revenue
increase are:
China sales to increase by 16% through brand growth and new product development
BEE+ brand launch into USA through ABM
Superlife expansion into online, USA and other international markets
Gross Margin
Gross Margin is expected to be broadly in line with FY21, being 44.6% versus 46.2% and utilising honey from the
FY20 season.
Expenses
Expenses are assumed to increase by $1.22 million from $3.54 million to $4.76 million. The main factors are:
Increase investment in marketing $350k
Covid wage subsidy not recurring in FY22 $600k
Other variable costs $270k
Inventory valuation
The Inventory valuation assumes inventory is valued at cost and not revalued upwards to wholesale market price,
as required under the NZIFRS standards. More detail on the impact of IFRS is described in the Appendix to this
notice.
Particular risks of the King Honey business include the following factors and mitigation steps:
Mānuka Honey production is dependent on weather conditions, with warm temperatures and minimal wind
being ideal. Adverse weather could reduce the yield and harvest volumes of honey in a season. King Honey
mitigates this risk by maintaining inventories of honey beyond the current seasonal production, and by locating
hives in a range of di erent regions.
King Honey is heavily reliant on its largest customer ABM, who distributes its products in China. ABM sales
accounted for 70% of King Honey’s revenue in the 2021 financial year. The concentration of sales through ABM
provides King Honey with significant benefits because of the extensive scope of the ABM network, but means
King Honey is heavily reliant on ABM to promote and increase the awareness of the BEE+ brand. King Honey
has sought to mitigate this risk by aligning interests through the joint venture ownership of the BEE+ brand
through BPB, is able to sell other branded product through alternative channels, such as sales of Superlife
online, and seeks to maintain a good working relationship with ABM.
King Honey needs to be able to identify and react to new trends in the health and wellness sector and achieve
successful brand cut through against its competitors. Me Today and its executive directors have had success in
building brands and marketing its own products and will be able to take those learnings into further
development of King Honey products and mitigate this risk given previous experience and appropriate expert
assistance.
Principal assumptions to King Honey FY22 budget
Particular risks of the acquisition and mitigation steps
In addition, pages 40-44 of the Me Today Listing Profile dated 13 March 2020, set out risks a ecting the existing Me
Today businesses which remain applicable. A copy of the Listing Profile is at:
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/CSM/349864/318680.pdf.
The Mānuka Honey sector in New Zealand and internationally is highly competitive. As King Honey continues to
expand, it will encounter new competition and there can be no assurance competition will not have a material
adverse e ect on the business and its financial results. However, King Honey has a point of di erence through
aligning itself with the extensive ABM network, and also has alternative products and sales channels.
The value of King Honey’s brands may be adversely a ected if King Honey is unable to obtain and enforce
trade mark and intellectual property rights for its brands. Third parties might seek to oppose trade mark
applications or independently develop their own new products in competition with new products developed by
King Honey. King Honey and BPB already have a range of registered trademarks or pending applications in
New Zealand or other jurisdictions, and as with Me Today, plan to retain expert advice to assist protecting its
trademarks and other intellectual property.
King Honey may fail to successfully execute its strategy in overseas markets or its products may not resonate
with consumers in foreign markets. While expansion into new markets can be di cult, King Honey has
positioned itself from competitors by focusing on premium products, and will be able to draw upon the Me
Today experience of new product development to further diversify its product set.
The sale, marketing and production of Mānuka Honey products may be subject to new regulations. Me Today
faces this risk in its existing business and seeks expert advice to assist with regulatory compliance.
King Honey’s operations are reliant on certain key personnel. Me Today has plans in place for an orderly
transition as Terry Jarvis steps back from the day-to-day running of the business.
It is not possible to assess with any certainty the implications of the COVID-19 pandemic on King Honey or the
economy as a whole. COVID-19 has to date reduced the sale of BEE+ branded product through tourist and gift
stores in New Zealand and the ability to increase that revenue base is dependent on further re-opening of the
borders. Internationally, any significant increase in the spread of the pandemic could slow expansion into
additional markets.
Capital structure following the King Honey acquisition and Capital Raise
The Company has 412,278,428 fully paid ordinary shares on issue as at 8 June 2021.
The following table summarises the existing shareholding structure of the Company, and describes the expected
shareholding structure after the issue of shares to the King Honey Vendors and under the Capital Raise.
MTL Securities Limited
Other existing Me Today
shareholders
King Honey Vendors
Investors subscribing in Capital
Raise
Total
222,000,000
190,278,428
NIL
N/A
412,278,428
53.85%
46.15%
222,000,000
190,278,428
113,636,364
178,977,273
704,892,065
31.49%
26.99%
16.12%
25.39%
Existing
shareholding
structure
%
Shareholding structure
after acquisition and
$15.75m Capital Raise
%
The King Honey acquisition will result in the existing shareholders’ shareholdings in the Company being diluted by
41.5% overall. This is because the allotment to the Vendors will dilute existing shareholders’ shareholdings by 21.6%,
and the Capital Raise will further dilute existing shareholders’ (already diluted) shareholdings by 25.4%.
Section 2.8 of the Independent Report comments that while the dilutionary impact is significant, Simmons Corporate
Finance is of the view that the existing shareholders’ main focus should be on whether there is any dilutionary
impact on the value of their respective shareholdings rather than on their level of voting rights and concludes that
the issue price and terms of issue of the shares to the vendors and through the Capital Raise are fair to existing
shareholders from a financial point of view and therefore, the King Honey acquisition does not dilute the economic
value of their respective shareholdings.
Additional information relating to the resolutions
Nature of resolutions
The resolutions to be considered at the meeting include three ordinary resolutions. An ordinary resolution is a
resolution passed by a simple majority of votes of shareholders of the Company, entitled to vote and voting.
Resolution 1
Resolution 1 is required by Listing Rule 5.1.1(b), as the proposed King Honey acquisition price exceeds more than
50% of the Company’s Average Market Capitalisation (approximately $35 million at the time of entry into the
Acquisition Agreement). The Company considers the acquisition is a natural extension of its existing lifestyle,
health and wellness businesses, and so does not amount to a significant change in the nature of the Company’s
business.
No voting restrictions apply to resolution 1.
Resolution 2
Resolution 2 is required by Listing Rule 4.1.1 which generally requires share issues to be approved by shareholders
unless an exception applies under the Listing Rules.
The Vendors (and their Associated Persons) (as defined in the Listing Rules) are not permitted to vote on this
resolution.
Resolution 3
Resolution 3 is required by Listing Rule 4.1.1 which generally requires share issues to be approved by shareholders
unless an exception applies under the Listing Rules.
Any wholesale investor that is a party to a subscription agreement with the Company in the Capital Raise or their
Associated Person(s) (as defined in the Listing Rules) that is a shareholder of the Company is not permitted to vote
on resolution 3.
Cross-conditionality of resolutions
The resolutions to be considered at the meeting include three ordinary resolutions.
An ordinary resolution is a resolution passed by a simple majority of votes of shareholders of the Company, entitled
to vote and voting.
Implementation of resolutions 1 to 3 are conditional upon all of resolutions 1 to 3 being approved by the
shareholders of the Company.
Consequences of Resolutions 1 to 3 not being approved
In the event that all of resolutions 1 to 3 are not approved, then:
The Company will continue operating with its current business activities; and
The King Honey acquisition and associated funding arrangements will not proceed. No break fees are payable
if the acquisition or funding does not proceed.
NZ RegCo no objection
This notice of meeting has been reviewed by NZ RegCo. NZ RegCo has confirmed that it has no objection to this
notice of meeting. However, NZ RegCo does not take responsibility for any statement in this notice of meeting or
any other document.
Appendix: Impact of acquisition accounting and IAS41 on King
Honey financial information
As noted above, to date King Honey’s financial statements have not been prepared in accordance with New
Zealand generally accepted accounting practice. In particular, the King Honey financial information shown in
the pro forma financial information set out above is presented on a more conservative basis than provided for
in NZ IAS 41 Agriculture standard for the following reasons.
Inventory valuation
Under NZ IAS 41, upon harvest of the honey from the hives, King Honey’s inventory is currently valued at cost
which is lower than market price.
Agricultural Assets - Bee Hives
Under IAS 41, the queens, bees and broods are required to be measured at their fair value less cost to sell. The
hives are required to be measured under NZ IAS 16 PPE, and recognised at cost less accumulated depreciation.
After applying these standards, a value for the hives will then be determined. Hives are currently recorded at
cost so any adjustment will likely result in an increase of the asset value.
Property Plant and Equipment
King Honey currently depreciates its asset using tax depreciation rates. NZIFRS 3 requires assets under a
business combination to be assessed at fair value. These assets of King Honey will need to be assessed to
determine fair value and an adjustment made accordingly.
Leased Assets
The leased assets of King Honey will be required to be assessed under NZIFRS 16 and capitalised as a right of
use asset with a corresponding lease liability.
---
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Appoint a Proxy to Vote on Your Behalf
STEP 1
hereby appointof
or failing him/herof
as my/our proxy to vote on my/our behalf in accordance with the instructions below and otherwise as he/she sees fit at the Special Meeting of Me Today Limited to be
held at Events on Khyber, Level 2, 155 Khyber Pass Road, Grafton, Auckland 1023 on Friday 25 June 2021 at 12:00pm and at any adjournment thereof and to vote on
any resolution to amend any of the resolutions, on any resolution so amended and on any other resolution proposed at the meeting (or any adjournment).
I/We being a securityholder/s of Me Today Limited
Items of Business - Voting Instructions/Ballot Paper (if a Poll is called)
STEP 2
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Signature of Securityholder(s) This section must be completed.
SIGN
or Sole Director/Director
Securityholder 1Securityholder 2Securityholder 3
Contact Name Contact Daytime Telephone Date
Ordinary Resolutions
1. Acquisition of King Honey – Ordinary Resolution – Listing Rule 5.1.1.
To approve the acquisition of King Honey Limited by the Company’s subsidiary, Me Today Manuka Honey
Limited (the Purchaser), for a total purchase price of $36 million to be satisfied by payment of $21 million
cash, an issue of $10 million in new shares in the Company, and the issue by the Purchaser of a 3 year
subordinated note for $5 million, as described further in the explanatory notes to the notice of meeting.
2. Issue of shares to King Honey vendors – Ordinary Resolution - Listing Rule 4.1.1.
To approve the issue of 113,636,364 fully paid ordinary shares to Terrence Wayne Jarvis and Jarvis
Burnes Trustee Limited as trustees of the TW Jarvis Family Trust at an issue price of 8.8 cents each in
part satisfaction of the purchase price for the King Honey acquisition, with such shares to rank equally
with existing shares in the Company, as described further in the explanatory notes to the notice
of meeting.
3. Issue of Capital Raise shares to investors – Ordinary Resolution – Listing Rule 4.1.1.
To approve the issue of 178,977,273 fully paid ordinary shares to subscribers in the capital raising being
undertaken in conjunction with the King Honey acquisition at an issue price of 8.8 cents each, with such
shares to rank equally with existing shares in the Company and provided that MTL Securities Limited and
its directors are not eligible to participate, as described further in the explanatory notes to the notice
of meeting.
For
Against
Abstain
Proxy
Discretion
or Director (if more than one)
Special Meeting of Me Today Limited to be held at
Events on Khyber, Level 2, 155 Khyber Pass Road,
Grafton, Auckland 1023 on Friday 25 June 2021 at
12:00pm
ATTENDANCE SLIP
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www.simmonscf.co.nz
Me Today Limited
Independent Report
In Respect of the Acquisition of King
Honey Limited
June 2021
Me Today Limited Independent Report
Index
Section Page
1. Executive Summary ........................................................................................................ 1
2. Evaluation of the Merits of the King Honey Acquisition .................................................... 4
3. Profile of Me Today ....................................................................................................... 15
4. Profile of King Honey .................................................................................................... 22
5. Reasonableness of the Purchase Price......................................................................... 29
6. Reasonableness of the Consideration Shares and the Capital Raise Shares
Issue Price .................................................................................................................... 34
7. Sources of Information, Reliance on Information, Disclaimer and Indemnity ................. 36
8. Qualifications and Expertise, Independence, Declarations and Consents ..................... 38
Appendix
I. Comparable Companies Transaction Multiples ....................................................................... 39
II. Comparable Companies Trading Multiples .............................................................................. 42
Me Today Limited Page 1 Independent Report
1. Executive Summary
1.1 Background
Me Today Limited (Me Today or the Company) is a New Zealand owned and
operated lifestyle and wellness company.
The Company acquired 100% of the shares in The Good Brand Company Limited
(Good Brand) and Good Brand’s wholly owned subsidiary Me Today NZ Limited for
$5.55 million on 31 March 2020 (the Me Today Acquisition). The Me Today
Acquisition was a backdoor listing of Good Brand into the Company. The Company
changed its name to Me Today Limited on 31 March 2020.
Me Today’s shares are listed on the main equities securities market (the NZX Main
Board) operated by NZX Limited (NZX) with a market capitalisation of approximately
$37.9 million as at 2 June 2021. Its audited total equity as at 31 March 2021 was
approximately $5.9 million.
A profile of the Company is set out in section 3.
1.2 Acquisition of King Honey
On 31 May 2021, Me Today and its wholly owned subsidiary Me Today Manuka
Honey Limited (MTMHL) entered into the Agreement for the Sale and Purchase of
Shares in King Honey Limited (the Sale Agreement) with Terry Jarvis and Jarvis
Burnes Trustee Limited as trustees of the TW Jarvis Family Trust (the Jarvis Family
Trust), whereby Me Today (through MTMHL) agreed to acquire 100% of the shares
in King Honey Limited (King Honey) from the Jarvis Family Trust (the King Honey
Acquisition) for $36.0 million (the Purchase Price).
The Purchase Price is to be satisfied by:
• cash of $21.0 million (the Cash Consideration)
• $5.0 million by way of a 3 year subordinated note (the Subordinated Note)
• $10.0 million through the issue of 113,636,364 fully paid ordinary shares in Me
Today (the Consideration Shares) to the Jarvis Family Trust at an issue price
of $0.088 per share (the Jarvis Allotment). 50% of the Consideration Shares
will be subject to transfer restrictions for one year and the remaining 50% of the
shares will be subject to transfer restrictions for 2 years from the date the
shares are allotted (the Jarvis Lock-up).
Me Today expects that the King Honey Acquisition will be completed by 30 June
2021 (the Completion Date).
King Honey is a premium New Zealand Mānuka Honey business, with the capacity
to produce over 350 tonnes of honey from more than 18,000 hives and 3,600 queen
bee rearing hives, placed across the North Island and into the Marlborough region.
A profile of King Honey is set out in section 4.
Capital Raise
In conjunction with the King Honey Acquisition, Me Today intends to undertake a
placement of 178,977,273 fully paid ordinary shares (the Capital Raise Shares) at
$0.088 per share to a number of third party investors to raise $15.75 million (the
Capital Raise).
The minimum 178,977,273 Capital Raise Shares will represent 25.39% of Me
Today’s shares on issue following the Jarvis Allotment and the Capital Raise.
Me Today Limited Page 2 Independent Report
The Company has mandated investment bank CM Partners to arrange the Capital
Raise. CM Partners intends to seek binding commitments from third party
subscribers to participate in the Capital Raise following announcement of the King
Honey Acquisition.
On 2 June 2021, Me Today announced that it had conditionally placed $10 million of
the Capital Raise with financial market participants and other wholesale investors.
The Company plans to raise the balance of $5.75 million of the Capital Raise through
a retail offer to existing Me Today shareholders and other members of the public in
New Zealand.
The proceeds from the Capital Raise, along with $8.5 million of bank debt from Bank
of New Zealand Limited (BNZ), will be used to fund the Cash Consideration.
1.3 Impact on Shareholding Levels
Me Today currently has 412,278,428 ordinary shares on issue, held by 2,002
shareholders (the Current Shareholders).
Following the King Honey Acquisition and assuming 178,977,273 Capital Raise
Shares are issued and there are no other changes to the Company’s capital structure:
• the Current Shareholders will collectively hold 58.49% of the Company’s
ordinary shares on issue
• the Jarvis Family Trust will hold 16.12% of the Company’s ordinary shares on
issue
• the subscribers to the Capital Raise (the Capital Raise Shareholders) will
collectively hold 25.39% of the Company’s ordinary shares.
Impact of the King Honey Acquisition on Shareholding Levels
Current
Shareholders
Jarvis Family
Trust
Capital Raise
Shareholders
Total
Current 412,278,428 - - 412,278,428
Jarvis Allotment - 113,636,364 - 113,636,364
Capital Raise - - 178,977,273 178,977,273
Post the King Honey Acquisition
412,278,428 113,636,364 178,977,273 704,892,065
% 58.49% 16.12% 25.39% 100.00%
1.4 Special Meeting
Me Today is holding a special meeting of shareholders on 25 June 2021, where the
Company will seek shareholder approval of 3 resolutions which cover the King Honey
Acquisition (the King Honey Resolutions):
• resolution 1 – approval of the King Honey Acquisition for the purposes of the
NZX Listing Rules (the Listing Rules)
• resolution 2 – approval of the Jarvis Allotment for the purposes of the Listing
Rules
• resolution 3 – approval of the Capital Raise for the purposes of the Listing
Rules.
The King Honey Resolutions are interdependent. All 3 resolutions must be passed
in order for any one particular resolution to be implemented. If a resolution is not
passed then no further resolutions will be put to the meeting and any resolutions
previously put to the meeting will not be treated as having been passed.
Me Today Limited Page 3 Independent Report
The King Honey Resolutions are ordinary resolutions. An ordinary resolution is a
resolution passed by a simple majority of votes of those shareholders entitled to vote
and voting on the resolutions in person or by proxy.
Voting Restrictions
All Current Shareholders are entitled to vote on each of the King Honey Resolutions,
other than any wholesale investor that is a party to a subscription agreement with the
Company in the Capital Raise or their Associated Person(s) (as defined in the Listing
Rules) who is not permitted to vote on resolution 3.
The Jarvis Family Trust is not a Current Shareholder. In any event, the Jarvis Family
Trust and any Associated Person (as defined in the Listing Rules) are not permitted
to vote on resolution 2.
1.5 Purpose of the Report
The Company’s board of directors (the Board) has engaged Simmons Corporate
Finance Limited (Simmons Corporate Finance) to prepare an Independent Report
on the merits of the King Honey Acquisition.
Simmons Corporate Finance issues this Independent Report to the Board for the
benefit of the Current Shareholders to assist them in forming their own opinion on
whether to vote for or against the King Honey Resolutions.
We note that each shareholder’s circumstances and objectives are unique.
Accordingly, it is not possible to report on the merits of the King Honey Acquisition in
relation to each shareholder. This report on the merits of the King Honey Acquisition
is therefore necessarily general in nature.
The Independent Report is not to be used for any other purpose without our prior
written consent.
We note that neither an Independent Adviser’s Report, as defined in the Takeovers
Code (the Code), nor an Appraisal Report, as defined in the Listing Rules, is required
to be provided by Me Today to the Current Shareholders.
1.6 Currency References
Currency references in this report are to:
• New Zealand dollars: $
• Australian dollars: A$.
Me Today Limited Page 4 Independent Report
2. Evaluation of the Merits of the King Honey Acquisition
2.1 Basis of Evaluation
We have evaluated the merits of the King Honey Acquisition, having regard to the
interests of the Current Shareholders.
There is no legal definition of the term merits in New Zealand in any statute dealing
with securities or commercial law.
In the absence of an explicit definition of merits, guidance can be taken from:
• the Takeovers Panel Guidance Note on Independent Advisers dated 11 March
2021
• definitions designed to address similar issues within New Zealand regulations
which are relevant to the proposed transaction
• overseas precedents
• the ordinary meaning of the term merits.
We are of the view that an assessment of the merits of the King Honey Acquisition
should focus on:
• the rationale for the King Honey Acquisition
• the terms and conditions of the King Honey Acquisition
• the impact of the King Honey Acquisition on Me Today’s financial position
• the impact of the King Honey Acquisition on the control of Me Today
• the impact of the King Honey Acquisition on Me Today’s share price
• the benefits and disadvantages for the Current Shareholders of the King Honey
Acquisition
• the implications if the King Honey Resolutions are not approved.
Our opinion should be considered as a whole. Selecting portions of the evaluation
without considering all the factors and analyses together could create a misleading
view of the process underlying the opinion.
2.2 Summary of the Evaluation of the Merits of the King Honey Acquisition
The Current Shareholders currently hold shares in a listed health and wellness
company focused on supplements and skincare products.
The King Honey Acquisition will expand the nature of Me Today’s business into a
complementary product line (Mānuka Honey) that is aligned with the Company’s
existing health, lifestyle and wellbeing focus.
The King Honey Acquisition consists of Me Today:
•
acquiring King Honey from the Jarvis Family Trust for $36.0 million
• issuing 113,636,364 Consideration Shares at an issue price of $0.088 per share to
Jarvis Family Trust
• issuing at least 178,977,273 Capital Raise Shares at an issue price of $0.088 per
share to raise at least $15.75 million.
Me Today Limited Page 5 Independent Report
The intended completion date of the King Honey Acquisition is 30 June 2021.
The Current Shareholders are being asked to vote on 3 resolutions in respect of the
King Honey Acquisition. All resolutions must be passed in order for the King Honey
Acquisition to proceed.
Accordingly, shareholders have 3 alternatives with regard to their voting:
• vote in favour of all 3 resolutions. In event that all resolutions are passed, the
Company will complete the King Honey Acquisition and will transform into an
owner and operator of King Honey, or
• vote against any of the 3 resolutions. In the event that any resolution is not
passed, then the King Honey Acquisition will not be undertaken and Me Today
will remain as an owner of a supplements and skincare brand and a sales and
marketing agency business, or
• abstain from voting, in which case the voting of the other shareholders will
determine the outcome.
Our evaluation of the merits of the King Honey Acquisition is set out in detail in
sections 2.3 to 2.14.
In summary, the positive aspects of the King Honey Acquisition are:
• the rationale for the King Honey Acquisition is sound. The King Honey
Acquisition will help to drive growth in the Company by expanding into a
complementary product line and is aligned with the existing health, lifestyle and
wellbeing focus of Me Today
• the terms of the King Honey Acquisition are reasonable:
− the Purchase Price of $36.0
million is reasonable based on our
assessment of the value of King Honey
− the terms of the $5.0 million Subordinated Note are fair to the Current
Shareholders
− the issue price of $0.088 per share under the Jarvis Allotment and the
Capital Raise is fair to the Current Shareholders. The issue price of $0.088
per share is at a premium to Me Today’s recent volume weighted average
share prices (VWAP). The Company’s one month VWAP to 28 May 2021
(the last trading day before the announcement of the King Honey
Acquisition) was $0.081. The issue price represents a premium of 9% to
the VWAP
− the conditions and warranties set out in the Sale Agreement are in line with
market practice for transactions of this nature and are not unreasonable
• there is unlikely to be any material transfer of value from the Current
Shareholders to the Jarvis Family Trust under the King Honey Acquisition as
we consider the Acquisition Price to be reasonable and the Subordinated Note
and the issue price of the Consideration Shares to be fair
• the King Honey Acquisition will have a positive impact on the Company's
financial position. The Company’s revenue and profitability will increase
significantly, as will the size of the Company on a total assets and net assets
basis
• the Jarvis Family Trust will not have a strong degree of influence over the
Company:
− its 16.12% shareholding will not be able to singlehandedly determine the
outcome of shareholder voting on special resolutions or ordinary
resolutions
Me Today Limited Page 6 Independent Report
− it will not be represented on the Board immediately, but may be
represented at some stage in the future
− it will not be part of the Company’s senior management team
• MTL Securities Limited (MTL) is currently Me Today’s largest shareholder,
holding 53.85% of the Company’s shares. The Jarvis Allotment and the Capital
Raise will significantly reduce MTL’s ability to exert control over shareholder
voting
• given that the Consideration Shares and the Capital Raise Shares issue price
of $0.088 is at a 9% premium to the one month VWAP and the size of the Jarvis
Allotment and the Capital Raise, we are of the view that any impact of the King
Honey Acquisition on the Company’s share price is more likely to be positive
than negative
• the implication of any of the King Honey Resolutions not being approved by the
Current Shareholders is that the King Honey Acquisition will not proceed. Me
Today will remain as a health and wellness business focussed on supplements
and skincare products and no capital will be raised under the Capital Raise.
In summary, the negative aspects of the King Honey Acquisition are:
• the risk profile of Me Today will expand to a degree from just the risks
associated with a business operating in the health and wellness sector to the
wider range of risks associated with the apiary and honey production sector
• the dilutionary impact of the King Honey Acquisition on the Current
Shareholders will result in their current collective interests in the Company
reducing by approximately 42%.
In our opinion, after having regard to all relevant factors, the positive aspects
of the King Honey Acquisition significantly outweigh the negative aspects from
the perspective of the Current Shareholders.
2.3 The Rationale for the King Honey Acquisition
The Board’s rationale for the transaction is set out in detail in the notice of special
meeting and is summarised below:
• access to new markets, which will support Me Today’s international growth
ambitions
• increased customer base and cross-selling opportunities given the overlap in
target customer audience
• growth through core range and new product development (eg launching honey
products through the Me Today
TM
brand and extending King Honey’s product
range through Me Today’s new product development program)
• strong strategic and premium brand alignment
• robust financial profile (strong revenue and earnings growth)
• an opportunity to realise revenue and cost synergies by leveraging distribution
networks and production channels and through increased purchasing power.
In our view, the rationale for the King Honey Acquisition is sound. The King Honey
Acquisition will help to drive growth in the Company by expanding into a
complementary product line and is aligned with the existing health, lifestyle and
wellbeing focus of Me Today.
Me Today Limited Page 7 Independent Report
2.4 Process Undertaken by Me Today
We are advised by the Board that the Company was approached by an investment
bank on behalf of the Jarvis Family Trust to discuss the possible acquisition of King
Honey to Me Today.
The Board commenced discussions in October 2020. Negotiations on behalf of Me
Today were led by directors Grant Baker and Stephen Sinclair with consultation with
the Board.
On 22 February 2021, Me Today entered into a non-binding term sheet with the Jarvis
Family Trust (the Term Sheet).
The due diligence process undertaken by the Board and its financial and legal
advisers encompassed a review of King Honey’s commercial operations, its financial
performance and legal matters.
The Board then negotiated and entered into the Sale Agreement with the Jarvis
Family Trust on 31 May 2021.
2.5 Terms of the King Honey Acquisition
Purchase Price
The Purchase Price is $36.0 million (on a debt free / cash free basis) and is to be
satisfied by the Cash Consideration, the Subordinated Note and the Jarvis Allotment.
There is no allowance for any working capital adjustment to the Purchase Price at
the Completion Date.
The Board has advised us that it negotiated the Purchase Price on a commercial
arms-length basis with the Jarvis Family Trust, based on the Board’s evaluation of
the underlying King Honey business model, King Honey’s future cash flows and its
assets.
Our assessment of the value of King Honey is set out in section 5. We assess the
value of King Honey on a debt free / cash free basis to be in the range of $35.4 million
to $40.5 million as at the present date.
Based on our analysis, we consider the Purchase Price to be reasonable.
Subordinated Note
Terms
The key terms of the Subordinated Note are:
• a term for repayment of 3 years following the Completion Date
• the note is secured but second ranking to secured bank debt from BNZ
• an annual interest rate of 4.0%
• interest is payable annually in arrears.
Conclusion
We consider the terms of the Subordinated Note to be in line with market practice for
subordinated debt of this nature and that they are fair to the Current Shareholders.
Me Today Limited Page 8 Independent Report
Jarvis Allotment
Terms
The 113,636,364 Consideration Shares issued under the Jarvis Allotment will be fully
paid ordinary shares ranking equally in all respects with all existing shares, issued at
$0.088 per share to the Jarvis Family Trust.
The Jarvis Family Trust has agreed that the Consideration Shares will be subject to
the Jarvis Lock-up, meaning that:
• 50% of the Consideration Shares cannot be traded until one year from the date
the shares are allotted
• the remaining 50% of the Consideration Shares cannot be traded until 2 years
from the date the shares are allotted.
These transfer restrictions are subject to exceptions if the Company gives its written
consent or to enable the Jarvis Family Trust to accept a takeover offer or to participate
in a scheme of arrangement in relation to the Company’s shares.
Reasonableness Assessment
Our assessment of the reasonableness of the issue price of the Consideration Shares
and the Capital Raise Shares is set out in section 6.
Conclusion
We consider the Consideration Shares issue price of $0.088 per share under the
Jarvis Allotment to be fair, from a financial point of view, to the Current Shareholders.
The Consideration Shares issue price is the same price at which the Capital Raise
Shares will be issued.
Capital Raise
Terms
The Capital Raise Shares will be fully paid ordinary shares ranking equally in all
respects with all existing shares, issued at $0.088 per share to the Capital Raise
Shareholders.
The $15.75 million raised from the issue of the Capital Raise Shares will be applied
towards the Cash Consideration.
Conclusion
We consider the Capital Raise Shares issue price to be fair to the Current
Shareholders.
The Capital Raise Shares issue price is the same price at which the Consideration
Shares will be issued.
Me Today Limited Page 9 Independent Report
Sale Agreement Conditions
The King Honey Acquisition is conditional on:
• Me Today obtaining the Current Shareholders’ approval of the King Honey
Resolutions
• Me Today raising $15.75 million through the Capital Raise
• King Honey receiving written consent to the King Honey Acquisition from the
landlords of its leased properties.
The proposed date for satisfaction of the above conditions is 30 June 2021.
We are of the view that the conditions of the King Honey Acquisition are in line with
market practice for transactions of this nature and are not unreasonable.
Sale Agreement Warranties
Under the Sale Agreement, the Jarvis Family Trust has provided warranties in
respect of King Honey’s shares, power and authority, information, accounts, related
party transactions, records and corporate matters, contracts, financing
arrangements, assets, stock and equipment, properties, intellectual property rights
and confidential information, information technology, litigation, compliance and
authorisations, employees, solvency, insurance, taxes and guarantees.
Mr Jarvis has agreed to a restraint of trade and has provided non-solicitation
undertakings for a period of 7 years from completion on usual arm’s length terms.
Each party’s liability under these warranties is limited to claims brought within 18
months of the Completion Date and to an aggregate amount limited to the Purchase
Price in the case of warranties relating to title and claim warranties or any tax claim
and 50% of the Purchase Price in the case of any other warranties.
We are of the view that the warranties provided under the Sale Agreement are in line
with market practice for transactions of this nature and are not unreasonable.
Completion Date
Completion of the King Honey Acquisition is expected to take place by 30 June 2021.
2.6 Impact on Financial Performance and Financial Position
A summary of Me Today’s and King Honey’s recent financial performance is set out
in sections 3.5 and 4.6 respectively and their recent financial position is set out in
sections 3.6 and 4.7 respectively.
As at 31 March 2021, Me Today had approximately $5.0 million of cash and short
term deposits and total equity of approximately $5.9 million.
The table below shows Me Today’s summary pro forma financial performance and
financial position as at 31 March 2021, assuming the King Honey Acquisition was
completed on 31 March 2021.
Me Today Limited Page 10 Independent Report
Financial Impact of the King Honey Acquisition
Me Today
(Audited)
$000
King Honey
(Unaudited)
$000
Impact of
Acquisition
and Funding
$000
Combined
(Pro Forma)
$000
Revenue 1,143 16,515 - 17,658
EBITDA (2,891) 3,868 - 977
Net profit / (loss) for the year (2,860) 2,289 - (571)
Total assets 6,714 26,411 14,199 47,324
Total liabilities (822) (2,110) (13,500) (16,432)
Net assets
5,892 24,301 699 30,892
EBITDA: Earnings before interest, tax, depreciation and amortisation
The analysis shows that the King Honey Acquisition will result in Me Today’s revenue
and profitability increasing significantly, as will the size of the Company on both a
total assets and net assets basis.
2.7 Impact on Control
Share Capital and Shareholders
Me Today currently has 412,278,428 fully paid ordinary shares on issue held by 2,002
shareholders. The names, number of shares and percentage holding of the
Company’s 10 largest shareholders as at 28 May 2021 are set out in section 3.4.
The Company’s largest shareholder at present is MTL, holding 53.85% of the
Company’s shares, which it acquired in March 2020 under the Me Today Acquisition.
MTL is owned by interests associated with Me Today directors Grant Baker, Michael
Kerr and Stephen Sinclair.
MTL’s current holding of 53.85% of the Company’s voting rights enables it to:
• pass or block ordinary resolutions (which require the approval of more than
50% of the votes cast by shareholders)
• block special resolutions (which require the approval of 75% of the votes cast
by shareholders).
Accordingly, MTL currently holds significant control over shareholder voting.
However, it cannot singlehandedly pass special resolutions.
Shareholding Levels Post the King Honey Acquisition
The Jarvis Family Trust currently does not hold any shares in the Company. As set
out in section 1.3, following the King Honey Acquisition (and assuming 178,977,273
Capital Raise Shares are issued):
• the Jarvis Family Trust will hold 16.12% of the Company’s shares
• the Current Shareholders will collectively hold 58.49% of the Company’s
shares, including MTL which will hold 31.49%
• the Capital Raise Shareholders will collectively hold 25.39% of the Company’s
shares.
Me Today Limited Page 11 Independent Report
Shareholding Voting
The King Honey Acquisition will result in a change from one shareholder (MTL)
holding 53.85% of the voting rights in the Company to 2 non-associated shareholders
(MTL and the Jarvis Family Trust) collectively holding 47.62% of the voting rights
(depending on the number of Capital Raise Shares issued). This will result in a
lessening of one or more shareholders being able to control shareholding voting:
• MTL will lose its ability to singlehandedly determine the outcome of ordinary
resolutions but it will still be able to singlehandedly block special resolutions
• as the Company’s second largest shareholder, the Jarvis Family Trust will be
able to influence the outcome of shareholder voting to a limited degree but it
will not be able to singlehandedly block special resolutions
• neither MTL nor the Jarvis Family Trust will be able to singlehandedly pass or
block ordinary resolutions nor pass special resolutions. However, if MTL and
the Jarvis Family Trust vote in the same manner, they may be able to
collectively determine the outcome of an ordinary resolution.
The ability for any shareholder to influence the outcome of voting on the Company’s
ordinary resolutions or special resolutions may be reduced by external factors such
as the Company’s constitution, the Code, the Listing Rules and the Companies Act
1993 (Co’s Act) (eg if the shareholder is precluded from voting on the resolution
because it is a party to the transaction which the resolution relates to).
MTL will Lose the Ability to Creep
MTL is currently able to utilise the creep provisions of Rule 7(e) of the Code. The
creep provisions enable entities that hold more than 50% and less than 90% of the
voting securities in a code company to acquire up to a further 5% of the code
company’s shares in any 12 month period without the need for shareholder approval.
Following the King Honey Acquisition, MTL will no longer be able to utilise the creep
provisions as it will hold less than 50% of the Company’s voting securities.
Board Control
As set out in section 3.3, the Company currently has 6 directors on the Board:
• 3 directors are associated with MTL
• no directors are associated with the Jarvis Family Trust.
We are advised by the Board that at this point in time there is no intention to appoint
a Jarvis Family Trust representative to the Board. However, the Jarvis Family Trust
may seek to have a representative on the Board in the future.
Operations
Following the King Honey Acquisition, the current King Honey management team
(other than Terry Jarvis) will continue to manage the day to day operations of King
Honey.
They will report to Me Today director / chief financial officer Stephen Sinclair who will
also assume the role of King Honey general manager.
Terry Jarvis is the current chief executive officer of King Honey. Following the King
Honey Acquisition, it is intended that Mr Jarvis will transition away from the day to
day running of the King Honey business but he will be available to be consulted.
Me Today Limited Page 12 Independent Report
Protection for Minority Shareholders
While MTL and the Jarvis Family Trust will have a degree of control over Me Today,
neither shareholder can act in an oppressive manner against minority shareholders.
The Co’s Act provides a level of protection to minority shareholders. Furthermore,
any transactions between the Company and any shareholder holding 10% or more
of the Company’s shares will need to satisfy the requirements of the Listing Rules
with respect to transactions with related parties.
2.8 Dilutionary Impact
The King Honey Acquisition will result in the Current Shareholders’ shareholdings in
the Company being diluted by 41.5%:
• the Jarvis Allotment will dilute the Current Shareholders’ shareholdings by
21.6%
• the Capital Raise will further dilute the Current Shareholders’ (already diluted)
shareholdings by 25.4%.
While the dilutionary impact is significant, we are of the view that the Current
Shareholders’ main focus should be on whether there is any dilutionary impact on
the value of their respective shareholdings rather than on their level of voting rights.
As stated in section 2.5, we are of the view that the Purchase Price, the Subordinated
Note and the Consideration Shares and the Capital Raise Shares issue price are fair
to the Current Shareholders from a financial point of view and therefore the King
Honey Acquisition does not dilute the value of their respective shareholdings.
2.9 Impact on Share Price and Liquidity
Me Today’s shares were placed on a trading halt on 11 December 2019 following the
announcement of the Me Today Acquisition. The quotation of the Company’s shares
was suspended by NZX Regulation on 17 December 2019 and recommenced on
3 April 2020.
A summary of Me Today’s daily closing share price and monthly volume of shares
traded from 3 April 2020 is set out in section 3.8.
In the year up to 28 May 2021 (immediately prior to the announcement of the King
Honey Acquisition), 20.1% of the Company’s shares traded at a VWAP of $0.099.
The closing share price on 28 May 2021 was $0.083 and the one month VWAP was
$0.081.
Given that the Consideration Shares and the Capital Raise Shares issue price of
$0.088 is at a 9% premium to the one month VWAP and the size of the Jarvis
Allotment and the Capital Raise, we are of the view that any impact of the King Honey
Acquisition on the Company’s share price is more likely to be positive than negative.
Liquidity
Trading in the Company’s shares is relatively thin, reflecting that the top 10
shareholders collectively hold 86.36% of the shares.
The King Honey Acquisition will not necessarily improve the liquidity of the
Company’s shares as the number of shares held by the Current Shareholders will
not change and the shares issued to the Jarvis Family Trust are subject to the Jarvis
Lock-up.
Me Today Limited Page 13 Independent Report
Should the Jarvis Family Trust seek to dispose of some of its Me Today shares
following the restricted transfer periods, this may result in increased trading in the
Company’s shares, thereby improving liquidity. Similarly, the sale of any Capital
Raise Shares may improve liquidity.
While we would expect a potential increase in demand for the Company’s shares
post the King Honey Acquisition, we note that the relatively small free float means
that there will be a limited number of shares available for sale and this may restrict
the level of trading in the Company’s shares.
2.10 Main Advantage to the Current Shareholders of the King Honey Acquisition
The Current Shareholders currently hold 100% of the shares in a relatively early
stage business that owns a supplements and skincare brand and a sales and
marketing agency business.
The King Honey Acquisition will significantly increase the size of the Company,
expanding the nature of Me Today’s business into a complementary product line that
is aligned with the Company’s existing health, lifestyle and wellbeing focus.
2.11 Main Disadvantage to the Current Shareholders of the King Honey Acquisition
The main disadvantage to the Current Shareholders of the King Honey Acquisition is
that the shares issued under the Jarvis Allotment and the Capital Raise will
significantly dilute their interests in the Company. Their collective shareholding will
be diluted by approximately 42% from their collective shareholding of 100% at
present to 58.49%.
In our view, the positive aspects of the expansion of the Company’s operations
outweigh the dilutionary impact of the King Honey Acquisition.
2.12 Other Issues for the Current Shareholders to Consider
Change in Business Risk
A detailed analysis of the risks associated with an investment in King Honey is set
out in the notice of special meeting and is summarised in section 4.5 of this report.
The analysis highlights the increased level of risk associated with an investment in
the Company post the King Honey Acquisition and the Current Shareholders need to
be cognisant of the change in the risk profile of their investment in the Company.
Benefits to Me Today of the Jarvis Family Trust as Cornerstone Shareholders
The Jarvis Allotment will position the Jarvis Family Trust as an important cornerstone
investor in Me Today along with MTL, signalling its confidence in the future prospects
of the Company.
Current Shareholder Approval is Required
Pursuant to the Listing Rules, the Current Shareholders must approve by ordinary
resolutions the King Honey Acquisition, the Jarvis Allotment and the Capital Raise.
The King Honey Acquisition will not proceed unless the Current Shareholders
approve all of the King Honey Resolutions.
May Increase the Attractiveness of the Company as a Takeover Target
Me Today will potentially have a higher profile following the King Honey Acquisition
and may be more visible and attractive to potential investors, which may increase the
likelihood of a takeover offer for the Company.
Me Today Limited Page 14 Independent Report
2.13 Likelihood of the King Honey Resolutions Being Approved
The King Honey Resolutions are interdependent with each other. All 3 King Honey
Resolutions must be passed in order for any one resolution of the 3 King Honey
Resolutions to be passed.
All Current Shareholders are entitled to vote on each of the King Honey Resolutions,
other than any accepted investor in the Capital Raise who cannot vote on resolution
3.
The Board has unanimously recommended that the Current Shareholders vote in
favour of the King Honey Resolutions.
The Company’s largest shareholder is MTL, which holds 53.85% of the voting rights
in the Company. MTL is owned by interests associated with 3 of the Company’s
directors – Grant Baker, Michael Kerr and Stephen Sinclair.
Given the Board’s recommendations, it appears that MTL will singlehandedly ensure
that each ordinary resolution is passed.
2.14 Implications of the King Honey Resolutions not Being Approved
If any one of the 3 King Honey Resolutions is not approved, then the King Honey
Acquisition will not proceed and Me Today will remain as a health and wellness
business focussed on supplements and skincare products. No capital will be raised
under the Capital Raise.
2.15 Voting For or Against the King Honey Resolutions
Voting for or against the King Honey Resolutions is a matter for individual
shareholders based on their own views as to value and future market conditions, risk
profile and other factors. Shareholders will need to consider these consequences
and consult their own professional adviser if appropriate.
Me Today Limited Page 15 Independent Report
3. Profile of Me Today
3.1 Background
The Company was incorporated on 27 June 2007 as RLV No. 3 Limited (RLV). It
changed its name to Orion Minerals Group Limited on 16 December 2008, to CSM
Group Limited on 8 April 2016 and to Me Today Limited on 31 March 2020.
RLV was established as a reverse listing vehicle for the purpose of providing a
privately owned company with a cost and time efficient way to achieve a stock market
listing on the NZX markets.
RLV issued a prospectus on 8 October 2007 and raised $250,000 (before issue
costs) through the issue of 25,000,000 shares at an issue price of $0.01 per share.
RLV was listed on the alternative market (the NZAX) operated by NZX on 29 October
2007.
On 12 December 2007, the Company announced that it had agreed to acquire all the
shares in TJRE Holdings Limited for approximately $13.75 million, representing a
reverse listing of The Joneses national residential real estate business through RLV
(the Joneses Transaction). However, the Company announced on 18 February
2008 that the Joneses Transaction would no longer proceed.
On 11 December 2008, RLV acquired 100% of the shares in Minera Varry S.A, a
Chilean company which owned an iron ore mining concession in Chile (the Minera
Varry Transaction).
In conjunction with the Minera Varry Transaction, RLV entered into a subscription
agreement with Fengli Group (Hong Kong) Co. Limited (Fengli), whereby Fengli
agreed to subscribe for up to 200,000,000 ordinary shares in RLV at an issue price
of US$0.125 per share and 50,000,000 options to acquire 50,000,000 ordinary
shares in RLV (the Fengli Capital Raise). Fengli eventually acquired 178,977,273
shares under the Fengli Capital Raise.
In 2011, the Board decided to cease the Company’s prospective mining operations
in Chile and pursue an alternative business strategy of undertaking private equity
investment in projects and companies with Chinese market potential.
On 17 July 2013, the Company’s shareholders approved the commencement of a
new business operation in Australia processing scrap metal for export sale to
Chinese markets (the CSM Transaction). China Scrap Metals Resources Pty
Limited (CSM Pty) was incorporated in Australia as a wholly owned subsidiary of the
Company to undertake the operations.
On 10 May 2017, the Company announced its intention to wind down CSM Pty’s
commercial scrap metal operations. CSM Pty was voluntarily liquidated on 6 January
2019.
On 11 December 2019, the Company announced the Me Today Acquisition. The Me
Today Acquisition was approved by the Company’s shareholders on 30 March 2020
and completed on 31 March 2020.
Me Today Limited Page 16 Independent Report
The Company’s key events are summarised below.
3.2 Nature of Operations
Me Today owns and operates the Me Today
TM
brand, a New Zealand founded and
based health and wellness brand that produces premium quality products clearly
linking supplements and natural skincare.
The Me Today product range was launched on 1 November 2019 with 8 supplements
products and 12 skincare products. The products are formulated using absorbable
ingredients and, where possible, are either vegetarian or vegan friendly. The range
has since grown to 17 supplements and 20 skincare products.
The products are contract manufactured in New Zealand by reputable contract
manufacturers.
The Me Today supplements and natural skincare ranges were launched into the
New Zealand pharmacy sector through the Green Cross Health Limited (Green
Cross) network of Unichem and Life Pharmacy stores. Green Cross has a network
of 361 stores nationwide. Me Today’s products are currently stocked in 280 Green
Cross stores.
As well as selling through the Green Cross network, Me Today sells its products
direct to consumers on its website
www.metoday.com.
While the Me Today
TM
brand has been launched with supplements and natural
skincare products as the platform, the Company sees significant opportunity to further
expand the product offering and take advantage of new trends within the health,
beauty and wellbeing spaces. It believes there are significant opportunities to take
the brand offshore into markets such as Australia, North America, United Kingdom,
Asia and China through a cross border e-commerce model.
Me Today announced on 15 June 2020 that it had appointed Beauden Barrett as a
brand ambassador for the Me Today
TM
brand globally. The Company announced
distribution agreements with Mash Beauty Lab Co., Limited in Japan on 10 March
2021 and Uniphar Wholesale Limited in Ireland on 31 March 2021.
The Company also owns Good Brand. Good Brand was established to sell and
market third party brands within the health and wellness space. Good Brand
represents the Me Today
TM
brand and other agency branded businesses such as
Life-space, Artemis and SleepDrops.
Me Today Limited Page 17 Independent Report
3.3 Directors and Senior Management
The Board consists of 6 directors:
• Grant Baker, non-executive chair
• Hannah Barrett, independent director
• Roger Gower, independent director
• Michael Kerr, executive director
• Stephen Sinclair, executive director
• Antony Vriens, independent director.
The Company’s senior management team consists of:
• Michael Kerr, chief executive officer
• Stephen Sinclair, chief financial officer.
3.4 Capital Structure and Shareholders
Ordinary Shares
Me Today currently has 412,278,428 fully paid ordinary shares on issue held by 2,002
shareholders.
The names, number of shares and percentage holding of the 10 largest shareholders
as at 28 May 2021 are set out below.
Me Today’s 10 Largest Shareholders
Shareholder No. of Shares %
MTL 222,000,000 53.85%
Hunter Holdings Limited (Hunter) 44,000,000 10.67%
New Zealand Depository Nominee (NZDN) 22,715,282 5.51%
Marvel Fantasy Limited (Marvel) 20,000,000 4.85%
Forsyth Barr Custodians Limited (FBCL) 10,000,506 2.43%
APZ Limited 9,913,290 2.40%
Wallflower Limited (Wallflower) 8,933,400 2.17%
James Keogh 7,180,609 1.74%
Custodial Services Limited 6,040,000 1.47%
Rhonda Preston 5,250,000 1.27%
Subtotal
356,033,087 86.36%
Others (1,992 shareholders) 56,245,341 13.64%
Total
412,278,428 100.00%
Source: NZX Company Research
MTL is owned by interests associated with Company directors Grant Baker, Michael
Kerr and Stephen Sinclair.
Hunter is owned by Adam Sorensen and Michael Sorensen.
NZDN holds 23,183,518 shares on behalf of Sharesies Limited.
Marvel is incorporated in Hong Kong and acquired its shareholding in December
2009.
FBCL holds 10,000,506 shares on behalf of the Lindsay Investment Trust.
APZ Limited is owned by John Sorensen.
Me Today Limited Page 18 Independent Report
Wallflower appears to be a New Zealand incorporated company owned by Lan Zhu
that has been removed from the companies register.
Share Options
On 15 June 2020, Me Today granted 3,000,000 share options to BB Promotions
Limited, a company owned by interests associated with Beauden Barrett.
The options are in 3 tranches of 1,000,000 options each, with vesting dates ranging
from 1 June 2021 to 1 June 2023 and expiry dates ranging from 30 June 2021 to 30
June 2023. The exercise price of each option is $0.09.
3.5 Financial Performance
A summary of Me Today’s recent financial performance is set out below.
Summary of Me Today Financial Performance
6 Mths to
31 Mar 19
(Audited)
$000
Year to
31 Mar 20
(Audited)
$000
Year to
31 Mar 21
(Audited)
$000
Revenue 80 566 1,143
Expenses (125) (1,381) (4,076)
Operating loss (45) (815) (2,933)
Finance income - 1 73
Reverse acquisition costs and listing expenses - (4,168) -
Loss before tax (45) (4,982) (2,860)
Income tax expense - - -
Net loss for the year
(45) (4,982) (2,860)
Source: Me Today audited financial statements and annual financial statements for the year ended 31 March 2021
Me Today’s revenue consists of the sale of Me Today
TM
branded products and
agency income earned by Good Brand.
Expenses consist mainly of cost of sales, marketing expenses, salaries and wages
and directors’ expenses.
The Company incurred $4.2 million of costs associated with the Me Today Acquisition
on 31 March 2020:
• reverse listing expenses - $0.2 million
• reverse listing share based payment expense - $4.0 million.
On 31 March 2021, Me Today advised the market that it expected forecast revenue
for the 2022 financial year to exceed $3 million. While the Me Today business is
continuing to grow and further develop its brand and market presence, the business
is expected to continue to incur a net loss after tax in the 2022 financial year.
Me Today Limited Page 19 Independent Report
3.6 Financial Position
A summary of Me Today’s recent financial position is set out below.
Summary of Me Today Financial Position
As at
31 Mar 19
(Audited)
$000
As at
31 Mar 20
(Audited)
$000
As at
31 Mar 21
(Audited)
$000
Cash and cash equivalents 38 4,168 1,195
Short term deposits - - 3,804
Trade and other receivables 21 247 418
Inventory - 341 934
Taxation receivable - 11 23
Current assets 59 4,767 6,374
Property, plant and equipment
1
10 23 267
Intangible assets - 62 73
Non current assets 10 85 340
Total assets
69 4,852 6,714
Trade payables and other liabilities (14) (529) (629)
Shareholder advances (100) - -
Lease liabilities – current - - (79)
Current liabilities (114) (529) (708)
Lease liabilities – non current - - (114)
Total liabilities
(114) (529) (822)
Net assets
(45) 4,323 5,892
Net tangible assets per share $0.012
2
$0.014
1 Including right-of-use assets
2 On a post share consolidation basis
Source: Me Today audited financial statements and annual financial statements for the year ended 31 March 2021
Me Today’s main assets are cash and deposits, which amounted to $5.0 million as
at 31 March 2021.
The Company also had $0.9 million of inventory on hand as at 31 March 2021 and
$0.3 million of fixed assets and right-of-use assets.
Payables of $0.6 million exceeded receivables of $0.4 million as at 31 March 2021.
The Company has no external borrowings and recorded lease liabilities of $0.2 million
as at 31 March 2021.
The Company had total equity of approximately $5.9 million as at 31 March 2021,
comprising:
• share capital – $13.7 million
• share based payments reserve – $0.1 million
• accumulated losses – negative $7.9 million.
Me Today Limited Page 20 Independent Report
3.7 Cash Flows
A summary of Me Today’s recent cash flows is set out below.
Summary of Me Today Cash Flows
6 Mths to
31 Mar 19
(Audited)
$000
Year to
31 Mar 20
(Audited)
$000
Year to
31 Mar 21
(Audited)
$000
Net cash (outflow) from operating activities (51) (1,064) (3,334)
Net cash inflow / (outflow) from investing activities (11) 1,494 (3,919)
Net cash inflow from financing activities
100 3,700 4,280
Net increase in cash held 38 4,130 (2,973)
Opening cash balance - 38 4,168
Closing cash balance
38 4,168 1,195
Source: Me Today audited financial statements and annual financial statements for the year ended 31 March 2021
Me Today has incurred approximately $4.4 million of cash losses from its operations
over the past 2 and a half year period to 31 March 2021.
The Company received $1.6 million of cash from CSM Group Limited under the Me
Today Acquisition in the 2020 financial year.
$3.8 million of cash was invested into short term deposits in the 2021 financial year.
Me Today raised $1.5 million in cash from wholesale investors on 31 March 2020 as
part of the Me Today Acquisition.
The Company raised $4.0 million on 10 July 2020 from a retail offer priced at $0.095
per share (the 2020 Retail Offer) and $0.5 million on 31 July 2020 under a share
purchase plan priced at $0.095 per share (the 2020 SPP).
3.8 Share Price History
Set out below is a summary of Me Today’s daily closing share price and monthly
volumes of shares traded from 3 April 2020 (following the completion of the Me Today
Acquisition) to 1 June 2021.
Source: NZX Company Research
During the period, Me Today’s shares have traded between $0.07 and $0.149 at a
VWAP of $0.098.
Me Today Limited Page 21 Independent Report
An analysis of Me Today’s recent VWAP, traded volumes and liquidity (measured as
traded volumes as a percentage of shares outstanding) up to 28 May 2021 (the last
trading day before the announcement of the King Honey Acquisition) is set out below.
Share Trading up to 28 May 2021
Period Low
($)
High
($)
VWAP
($)
Volume
Traded
(000)
Liquidity
1 month 0.079 0.085 0.081 2,955 0.7%
3 months 0.076 0.085 0.080 9,225 2.2%
6 months 0.070 0.092 0.081 20,321 4.9%
12 months 0.070 0.160 0.099 82,719 20.1%
Source: NZX Company Research
Trading in the Company’s shares is relatively thin, reflecting that the top 10
shareholders collectively hold 86.36% of the Company’s shares.
Me Today Limited Page 22 Independent Report
4. Profile of King Honey
4.1 Ownership Structure
King Honey was incorporated on 17 March 2011 as King Honey Health Products
Limited. It changed its name to King Honey Limited on 23 January 2015.
The issued capital of King Honey consists of 1,000 ordinary shares.
The shares are held by Terry Jarvis and Jarvis Burnes Trustee Limited as trustees of
the Jarvis Family Trust.
The sole director of King Honey is Terry Jarvis.
4.2 Nature of Operations
An overview of King Honey is set out in the notice of special meeting and is
summarised below.
King Honey began operations in 2016 with a vision to bring highly skilled beekeepers
together to develop a fully integrated Mānuka Honey brand.
Until 2018, King Honey primarily accumulated high quality honey with limited third
party brand exports to China and Europe.
Nowadays it has the capacity to produce more than 350 tonnes of honey from over
18,000 hives and 3,600 queen bee rearing hives, placed across the North Island and
into the Marlborough region.
As well as servicing the domestic market, the business now exports into Asia,
Australia, UK, Europe and USA.
King Honey holds licences or has other commercial arrangements with over 100
landowners covering approximately 900 hive sites. King Honey has targeted Mānuka
dense areas by mapping large parts of the North Island, utilising GPS and aerial
mapping techniques through partnering with an aviation company.
King Honey operates across the North Island (Kerikeri, Northland, Central North
Island, Taranaki, Kawhia and Wairarapa) and in Blenhiem.
Its operations include:
• 5 leased apiary facilities used for staff operations, storage of equipment, hive
maintenance components
• 2 queen bee rearing operations employing 13 staff
• 5 regional managers and 45 highly skilled employed beekeepers
• licences with over 100 landowners covering approximately 900 hive sites
• an agri-testing laboratory to ensure only quality Mānuka Honey is stored
• a processing, bottling and storage plant located in Taupō with 27 employees
• a head office located in Auckland with 3 sales and 4 finance staff.
Honey is extracted at the end of the season using a third party contractor and is
transported back to Taupō and stored in drums for testing. The honey is then
processed and bottled in Taupō into either 250g or 500g bottles.
The business currently operates 2 brands:
• the established BEE+ brand
• the Superlife brand, which was launched in 2020.
Me Today Limited Page 23 Independent Report
The BEE+ brand is owned by a joint venture company called Bee Plus Brands (China)
Limited (BPB). BPB is 15% owned by King Honey and 85% by Access Brand
Management Pty Limited (ABM).
ABM is a multi-level marketing company representing a number of well-known
brands. It was established in Australia and has offices in Sydney, Melbourne and
Auckland. Its head office is now in Hangzhou, Zhejiang, People's Republic of China
with over 1,000 employees. It employees over 100 people in Australia.
BEE+ is the only honey brand represented by ABM. Since the partnership
commenced in May 2019, ABM has purchased approximately $21 million worth of
product. ABM sales accounted for 70% of King Honey’s revenue in the 2021 financial
year.
King Honey wholly owns the Superlife brand.
4.3 Growth Opportunities
The key growth opportunities identified by Me Today in respect of the King Honey
Acquisition include:
• increased sales of BEE+ branded products in China and North America under
the ABM distribution agreement
• the launch of online sales of Superlife branded products in North America
• the launch of Me Today
TM
branded honey products
• the launch of new products such as propolis, snap pack, lozenge and
toothpaste products
• the use of Me Today’s new product development program to extend and tailor
King Honey’s product range
• leveraging both businesses’ distribution networks and production channels
• increased buying power over packaging materials.
4.4 Mānuka Honey Industry
New Zealand Honey Industry
According to Apiculture New Zealand, New Zealand’s apiculture industry is a
$5 billion industry and New Zealand is the third largest global exporter of honey (on
a value basis) behind China and Argentina.
Key industry statistics in 2020 are:
• registered beehives: 854,477
• registered beekeepers: 9,510
• honey production: 23,000 tonnes
• value of honey exports: $506 million.
Mānuka Honey
Mānuka Honey comes from the nectar of the flower of the Mānuka bush
(Leptospermum scoparium) which is indigenous to New Zealand (and may be native
to South East Australia). The Mānuka flower produces nectar with characteristic and
unique signature compounds.
Me Today Limited Page 24 Independent Report
Whilst the antibacterial properties of all types of honeys have been known for
centuries, recent laboratory studies have shown that Mānuka Honey is exceptionally
high in antimicrobial potential.
The chemical marker methylglyoxal (MGO) is the key natural compound in Mānuka
Honey that gives the honey its antimicrobial activity.
Mānuka New Zealand Honey Industry
Over the past decade, the New Zealand Mānuka Honey industry has experienced
exceptional growth in the number of commercial beekeeping businesses producing
Mānuka Honey and the number of Mānuka Honey distributors.
From 2008 to 2018, there was an increase in beehives from approximately 360,000
to approximately 880,000 beehives, with the majority of the growth in the North
Island.
During this period, there was a clear move away from bulk honey to retail packaged
honey to enhance dollar returns per kilogram.
The Mānuka Honey industry in New Zealand underwent a massive change in
December 2017 with the new definition for Mānuka Honey released by the Ministry
for Primary Industries. To be defined as Mānuka Honey, 5 chemical markers must
be present in the honey. The new definition of Mānuka Honey was released in
response to the growing concerns of fraudulent honey being sold as Mānuka Honey
and damaging the brand’s integrity.
Mānuka Honey is now graded under the Unique Mānuka Factor
TM
(UMF) Grading
System, which has 2 components which are expressed on any UMF honey product:
• label: the label claim that it is genuine Mānuka Honey
• number: the unique signature compounds characteristic of the honey which
ensure purity and quality (5+ UMF, 10+ UMF, 15+ UMF, 20+ UMF and 25+
UMF).
4.5 Key Business Risks
The key business risks for Me Today arising from the King Honey Acquisition are set
out in the notice of special meeting and are summarised below:
• Mānuka Honey production is dependent on weather conditions, with warm
temperatures and minimal wind being ideal
• King Honey is heavily reliant on its largest customer ABM, who distributes its
products in China. ABM sales accounted for 70% of King Honey’s revenue in
the 2021 financial year
• King Honey needs to be able to identify and react to new trends in the health
and wellness sector and to achieve successful brand cut through against its
competitors
• the Mānuka Honey sector in New Zealand and internationally is highly
competitive
• the value of King Honey’s brands may be adversely affected if King Honey is
unable to obtain and enforce trade mark and intellectual property rights for its
brands
• King Honey may fail to successfully execute its strategy in overseas markets
or its products may not resonate with consumers in foreign markets
Me Today Limited Page 25 Independent Report
• the sale, marketing and production of Mānuka Honey products may be subject
to new regulations
• it is not possible to assess with any certainty the implications of the COVID-19
pandemic on King Honey or the economy as a whole.
4.6 Financial Performance
A summary of King Honey’s recent financial performance is set out below.
Summary of King Honey Financial Performance
Year to
31 Mar 19
(Unaudited)
$000
Year to
31 Mar 20
(Unaudited)
$000
Year to
31 Mar 21
(Unaudited)
$000
Year to
31 Mar 22
(Forecast)
$000
Revenue 7,918 18,095 16,515 21,501
Cost of sales (9,502) (12,641) (9,135) (11,558)
Gross profit (1,584) 5,454 7,380 9,943
Other income - - 32 72
Operating expenses (2,666) (3,078) (3,544) (4,755)
EBITDA (4,250) 2,376 3,868 5,260
Depreciation (1,232) (1,278) (1,377) (1,334)
EBIT (5,482) 1,098 2,491 3,926
Interest expense (84) (302) (202) (65)
Net profit / (loss) for the year
(5,566) 796
2,289 3,861
EBIT: Earnings before interest and taxation
Source: King Honey 2020 financial statements, 2021 management accounts and 2022 forecast
As is common with closely held companies, King Honey’s financial statements have
not been prepared in accordance with New Zealand generally accepted accounting
practice (NZ GAAP).
King Honey recognises inventory at cost rather than valuing its honey inventory at
fair value as required under New Zealand Equivalent to International Accounting
Standard 41 Agriculture (NZ IAS 41).
King Honey’s revenue has grown from $7.9 million in the 2019 financial year to
$16.5 million in the 2021 financial year and its EBITDA has steadily increased from
negative $4.3 million in 2019 to $3.9 million in 2021.
Me Today Limited Page 26 Independent Report
The growth in revenue and earnings has been primarily driven by an increased
number of hive placements and higher harvest yields, along with securing ABM as a
new customer in the China market in May 2019.
The number of hive placements has increased from 13,696 in 2019 to 18,705 in 2021.
The largest growth in hive placements has been in the Central North Island.
Despite the increase in placements in 2021, adverse weather conditions resulted in
a lower yield and a 30% decrease in harvest volumes. This, along with the
international travel restrictions due to the COVID-19 pandemic impacting sales to
New Zealand-based gift shops, contributed to a 9% decrease in revenue in 2021.
Sales to China accounted for 73% of 2021 revenue, with Japan sales accounting for
20% of revenue.
Cost of sales includes the allocated beekeeping and production costs of honey sold.
Gross margin increased from 30% in 2020 to 45% in 2021 due to a shift away from
drum honey and OEM bottled honey sales to BEE+ branded bottled sales which sell
at a higher gross margin.
King Honey’s main operating expenses are:
• production costs for the bottling facility based in Taupō
• laboratory costs in respect of testing the honey for the UMF / MGO ratings
• administration expenses including personnel, advertising and marketing and
office costs.
Beekeeping costs relating to the harvest of honey are capitalised to inventory.
The 2022 forecast is for a 30% increase in revenue to $21.5 million and a 36%
increase in EBITDA to $5.3 million.
The forecast growth in revenue is mainly driven by:
•
a 16% increase in China sales through brand growth and new product development
• the launch of the BEE+ brand into the United States through ABM
• the expansion of the Superlife brand into online, the United States and other
international markets.
Forecast gross margin of 46% is broadly in line with 2021 gross margin of 45%,
utilising honey from the 2020 season.
Operating expenses are forecast to increase by $1.2 million to $4.8 million, due to:
• a $0.3 million increased investment in marketing
• $0.5 million of COVID-19 wage subsidy not recurring in 2022
• a $0.3 million increase in other variable costs.
Me Today Limited Page 27 Independent Report
4.7 Financial Position
A summary of King Honey’s recent financial position is set out below.
Summary of King Honey Financial Position
As at
31 Mar 19
(Unaudited)
$000
As at
31 Mar 20
(Unaudited)
$000
As at
31 Mar 21
(Unaudited)
$000
Receivables 602 902 1,681
Inventories 10,716 14,295 16,858
Payables and accruals (2,747) (3,499) (2,110)
Operating working capital 8,571 11,698 16,429
Fixed assets 7,047 7,645 7,872
Investment in tangible operating assets 15,618 19,343 24,301
Intangible assets 545 545 545
Investment in operating assets
16,163 19,888 24,846
Cash (104) (96) (4,394)
Borrowings 4,303 6,199 11,167
Net IBD 4,199 6,103 6,773
Related party advances 23,804 24,829 26,829
Total equity (11,840) (11,044) (8,756)
Capital employed
16,163 19,888 24,846
IBD: Interest bearing debt
Source: King Honey 2020 financial statements and 2021 management accounts
As previously noted, King Honey’s financial statements have not been prepared in
accordance with NZ GAAP. The above summary does not include the fair value of
beehives as required under NZ IAS 41.
King Honey’s investment in operating assets has increased from $16.2 million as at
31 March 2019 to $24.8 million as at 31 March 2021, reflecting the growth in the size
of the business’ operations over the 2 year period.
Operating working capital has increased from $8.6 million to $16.4 million over the
period. Inventory is the major component of operating working capital and consists
mainly of capitalised current season beekeeping costs (work in progress), as well as
bulk drum honey and bottled honey.
Me Today Limited Page 28 Independent Report
Inventory is valued at cost and not revalued upwards to wholesale market price as
required under NZ GAAP.
Fixed assets include worker bees, brood and hives (eg boxes, frames and pallets),
vehicles, beekeeping, processing plant and laboratory equipment, queen assets and
leasehold equipment.
The value of beehives is not included in the above summary of financial position.
Under NZ GAAP, the queens, bees and broods are required to be measured at their
fair value less cost to sell and the hives are required to be recognised at cost less
accumulated depreciation.
Intangible assets represent goodwill of $0.5 million in respect of the acquisition of Far
North Bees.
King Honey’s investment in operating assets is funded by a mixture of net IBD,
shareholders’ advances and equity.
The King Honey Acquisition is structured on a debt free / cash free basis. Prior to
the Completion Date, net IBD will be repaid and the shareholders’ advances will be
capitalised.
Me Today Limited Page 29 Independent Report
5. Reasonableness of the Purchase Price
5.1 Basis of Valuation
In general terms it is recognised that the value of a share represents the present
value of the net cash flows expected therefrom. Cash flows can be in the form of
either dividends and share sale proceeds or a residual sum derived from the
liquidation of the business.
There are a number of methodologies used in valuing shares and businesses. The
most commonly applied methodologies include:
•
discounted cash flow (DCF)
• capitalisation of earnings
• net assets or estimated proceeds from an orderly realisation of assets.
Each of these valuation methodologies is applicable in different circumstances. The
appropriate methodology is determined by a number of factors including the future
prospects of the business, the stage of development of the business and the
valuation practice or benchmark usually adopted by purchasers of the type of
business involved.
The DCF method is the fundamental valuation approach used to assess the present
value of future free cash flows (FCF), recognising the time value of money and risk.
The value of an investment is equal to the value of FCF arising from the investment,
discounted at the investor’s required rate of return.
The capitalisation of earnings method is an adaptation of the DCF method. It requires
an assessment of the maintainable earnings of the business and a selection of a
capitalisation rate (or earnings multiple) appropriate to that particular business for the
purpose of capitalising the earnings figure.
An assets based methodology is often used in circumstances where the assets of a
company have a market value independent of the profitability of the company that
owns them. A valuation based on an orderly realisation of assets is normally
restricted to instances where the investor holds sufficient control to effect a sale of
the assets and/or there is some indication that an orderly realisation is contemplated.
5.2 Valuation Approach
We have assessed the fair market value of King Honey using the capitalisation of
earnings method.
The capitalisation of earnings method that we have applied derives an assessment
of the value of the core operating business, prior to considering how the business is
financed or whether it has any significant surplus assets. This ungeared business
value is commonly referred to as the enterprise value and represents the market
value of the operating assets (ie operating working capital, fixed assets and intangible
assets such as brand names, licences, know-how and general business goodwill)
that generate the operating income of the business.
Me Today Limited Page 30 Independent Report
5.3 Capitalisation of Earnings Valuation
Overview
We have assessed King Honey’s future maintainable earnings and have reviewed
the market valuation and operational performance of comparable companies to
derive a range of earnings multiples to apply to our assessed level of maintainable
earnings.
Future Maintainable Earnings
The evaluation of maintainable earnings involves an assessment of the level of
profitability which (on average) the business can expect to generate in the future,
notwithstanding the vagaries of the economic cycle.
The assessment of maintainable earnings is made after considering such factors as
the risk profile of the business, the characteristics of the market in which it operates,
its historical and forecast performance, non-recurring items of income and
expenditure and known factors likely to impact on future operating performance.
We have used EBITDA as the measure of earnings. The use of EBITDA and EBITDA
multiples is common in valuing businesses for acquisition purposes as it eliminates
the effect of financial leverage which is ultimately in the control of the acquirer and
also eliminates any distortions from the tax position of the business and differing
accounting policies in respect of depreciation and the amortisation of intangible
assets.
The table below shows EBITDA for the 2019 to 2021 (actual) and 2022 (forecast)
financial years, along with adjustments for various one-off, non-recurring items of
expenditure.
King Honey EBITDA
Year
31 Mar 2019
(Actual)
$000
Year
31 Mar 2020
(Actual)
$000
Year
31 Mar 2021
(Actual)
$000
Year
31 Mar 2022
(Forecast)
$000
Reported EBITDA (4,250) 2,376 3,868 5,260
Adjustments for one-off, non-recurring expenditure
Impact of COVID-19 - (192) (183) -
Consulting costs 166 48 54 -
Bad debts - - 55 -
Owner’s costs 79 - - -
Remuneration costs 182 144 143 (200)
Travel costs 106 156 - -
Bank fees 89 99 93 -
Adjusted EBITDA
(3,628) 2,631 4,030 5,060
King Honey’s operations have grown significantly since 2019, with a 37% increase in
the number of hive placements from 13,696 in 2019 to 18,705 in 2021. The
distribution agreement with ABM has seen a significant increase in sales to China.
Revenue is forecast to continue to grow in 2022, driven by increased sales in China
and North America through ABM and online sales under the Superlife brand.
Accordingly, we are of the view that King Honey’s maintainable EBITDA is best
represented by the adjusted forecast 2022 EBITDA.
Based on the above, we assess King Honey’s maintainable EBITDA to be in the
vicinity of $5.06 million.
Me Today Limited Page 31 Independent Report
Earnings Multiple
Actual sales of comparable businesses can provide reliable support for the selection
of an appropriate earnings multiple. In addition, we can infer multiples from other
evidence such as minority shareholding trades for listed companies in New Zealand
and overseas with similar characteristics to King Honey or transactions involving
businesses in the same industry.
Given the limited number of listed companies that are truly comparable with King
Honey, we have also reviewed multiples for companies in the health and wellness
sector.
Transaction Multiples
Set out at Appendix I is an analysis of 10 transactions over the past 7 years involving
Australasian honey businesses and health and wellness businesses, showing
historic and prospective EBITDA multiples.
Source: S&P Capital IQ, broker’s reports, media coverage, company websites
The analysis shows that:
• the historic EBITDA transaction multiples range from 7.4x to 18.1x at an average
of 11.8x and a median of 12.9x
• the prospective EBITDA transaction multiples range from 7.0x to 12.1x at an
average of 10.3x and a median of 11.4x.
Trading Multiples
Set out in Appendix II is an analysis of historic and prospective EBITDA multiples for
7 Australasian health and wellness companies that are listed on the NZX Main Board
and ASX.
The comparable companies’ multiples are based on minority trades and as such do
not include any premium for control.
Me Today Limited Page 32 Independent Report
Source: S&P Capital IQ, data as at 1 June 2021
The analysis shows that:
• the historic EBITDA trading multiples range from 4.7x to 23.9x at an average
of 12.3x and a median of 9.6x
• the prospective EBITDA trading multiples range from 10.6x to 17.7x at an
average of 13.5x and a median of 12.9x.
Conclusion
There is a considerable range in the observed multiples. In general terms, the
smaller companies trade at lower multiples than the larger companies.
King Honey is significantly smaller than most of the comparable companies.
Therefore we consider an appropriate EBITDA multiple for King Honey should be
lower than those observed for most of the comparable companies.
Given the above, we consider an appropriate prospective EBITDA multiple for King
Honey to be in the range of 7.0x to 8.0x.
Valuation Conclusion
We assess the value of King Honey’s business to be in the range of $35.4 million to
$40.5 million as at the present date based on the capitalisation of earnings method.
Valuation of King Honey Business
Low
$000
High
$000
Future maintainable EBITDA 5,060 5,060
EBITDA multiple 7.0x 8.0x
Value of King Honey business
35,420 40,480
The King Honey Acquisition is structured on a debt free / cash free basis.
Accordingly, the assessed value of King Honey’s business equates to the value of
King Honey’s equity.
Me Today Limited Page 33 Independent Report
5.4 Conclusion
We assess the value of King Honey’s equity (on a debt free / cash free basis) to be
in the range of $35.4 million to $40.5 million as at the present date.
The Purchase Price of $36.0 million sits within our valuation range. Accordingly, we
are of the view that the Purchase Price is reasonable.
Me Today Limited Page 34 Independent Report
6. Reasonableness of the Consideration Shares and the Capital
Raise Shares Issue Price
6.1 Assessment of the Reasonableness of the Issue Price
We have assessed the reasonableness of the issue price of $0.088 per share by
reference to:
• the prices at which the Company has recently issued shares to raise capital
• the prices at which the Company’s shares have recently traded on the NZX
Main Board prior to the announcement of the King Honey Acquisition
• the asset backing of the shares.
6.2 Capital Raising
The Company has undertaken 2 share issues since the completion of the Me Today
Acquisition:
• the issue of 42,105,263 ordinary shares on 10 July 2020 at $0.095 per new
ordinary share under the 2020 Retail Offer, raising $4.0 million
• the issue of 5,263,167 ordinary shares on 31 July 2020 at $0.095 per new
ordinary share under the 2020 SPP, raising $0.5 million.
6.3 Share Price History
A summary of Me Today’s daily closing share price and monthly volumes of shares
traded since 3 April 2020 is set out in section 3.8.
The issue price of $0.088 per share is in line with the VWAP for the past 12 months
up to 28 May 2021 (ie the last trading day before the announcement of the King
Honey Acquisition) and above the Company’s more recent observed trading prices.
Source: NZX Company Research
Me Today Limited Page 35 Independent Report
The issue price of $0.088 per share represents a premium of:
• 9% to the 1 month VWAP prior to the announcement of the King Honey
Acquisition of $0.081
• 10% to the 3 month VWAP prior to the announcement of the King Honey
Acquisition of $0.080
• 9% to the 6 month VWAP prior to the announcement of the King Honey
Acquisition of $0.081.
6.4 Net Assets per Share
Me Today's unaudited total equity amounted to approximately $5.9 million as at
31 March 2021, equating to net assets of $0.014 per share.
6.5 Conclusion
We consider the Consideration Shares and the Capital Raise Shares issue price of
$0.088 per share to be reasonable from the perspective of the Current Shareholders
as it is at a premium to the prices that the Company’s shares have traded at recently
on the NZX Main Board.
Me Today Limited Page 36 Independent Report
7. Sources of Information, Reliance on Information, Disclaimer
and Indemnity
7.1 Sources of Information
The statements and opinions expressed in this report are based on the following main
sources of information:
• the draft notice of special meeting
• the Term Sheet
• the Sale Agreement
• the Me Today annual report for the year ended 31 March 2020
• the Me Today annual financial statements for the year ended 31 March 2021
• Me Today’s due diligence material in respect of King Honey
• publicly available information on the Mānuka Honey industry
• data in respect of Me Today and companies operating in the health and
wellness industry from NZX Company Research and S&P Capital IQ.
During the course of preparing this report, we have had discussions with and / or
received information from the Board and Me Today’s financial and legal advisers.
The Board has confirmed that we have been provided for the purpose of this
Independent Report with all information relevant to the King Honey Acquisition that
is known to them and that all the information is true and accurate in all material
aspects and is not misleading by reason of omission or otherwise.
Including this confirmation, we have obtained all the information that we believe is
desirable for the purpose of preparing this Independent Report.
In our opinion, the information to be provided by Me Today to the Current
Shareholders is sufficient to enable the Board and the Current Shareholders to
understand all the relevant factors and to make an informed decision in respect of
the King Honey Acquisition.
7.2 Reliance on Information
In preparing this report we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was available from
public sources and all information that was furnished to us by Me Today and its
advisers.
We have evaluated that information through analysis, enquiry and examination for
the purposes of preparing this report but we have not verified the accuracy or
completeness of any such information or conducted an appraisal of any assets. We
have not carried out any form of due diligence or audit on the accounting or other
records of Me Today or King Honey. We do not warrant that our enquiries would
reveal any matter which an audit, due diligence review or extensive examination
might disclose.
Me Today Limited Page 37 Independent Report
7.3 Disclaimer
We have prepared this report with care and diligence and the statements in the report
are given in good faith and in the belief, on reasonable grounds, that such statements
are not false or misleading. However, in no way do we guarantee or otherwise
warrant that any forecasts of future profits, cash flows or financial position of Me
Today or King Honey will be achieved. Forecasts are inherently uncertain. They are
predictions of future events that cannot be assured. They are based upon
assumptions, many of which are beyond the control of Me Today and King Honey
and their respective directors and management teams. Actual results will vary from
the forecasts and these variations may be significantly more or less favourable.
We assume no responsibility arising in any way whatsoever for errors or omissions
(including responsibility to any person for negligence) for the preparation of the report
to the extent that such errors or omissions result from our reasonable reliance on
information provided by others or assumptions disclosed in the report or assumptions
reasonably taken as implicit, provided that this shall not absolve Simmons Corporate
Finance from liability arising from an opinion expressed recklessly or in bad faith.
Our evaluation has been arrived at based on economic, exchange rate, market and
other conditions prevailing at the date of this report. Such conditions may change
significantly over relatively short periods of time. We have no obligation or
undertaking to advise any person of any change in circumstances which comes to
our attention after the date of this report or to review, revise or update this report.
We have had no involvement in the preparation of the notice of special meeting and
have not verified or approved the contents of the notice of special meeting. We do
not accept any responsibility for the contents of the notice of special meeting except
for this report.
7.4 Indemnity
Me Today has agreed that, to the extent permitted by law, it will indemnify Simmons
Corporate Finance and its directors and employees in respect of any liability suffered
or incurred as a result of or in connection with the preparation of the report. This
indemnity does not apply in respect of any negligence, wilful misconduct or breach
of law. Me Today has also agreed to indemnify Simmons Corporate Finance and its
directors and employees for time incurred and any costs in relation to any inquiry or
proceeding initiated by any person. Where Simmons Corporate Finance or its
directors and employees are found liable for or guilty of negligence, wilful misconduct
or breach of law or term of reference, Simmons Corporate Finance shall reimburse
such costs.
Me Today Limited Page 38 Independent Report
8. Qualifications and Expertise, Independence, Declarations and
Consents
8.1 Qualifications and Expertise
Simmons Corporate Finance is a New Zealand owned specialist corporate finance
advisory practice. It advises on mergers and acquisitions, prepares independent
expert's reports and provides valuation advice.
The person in the company responsible for issuing this report is Peter Simmons,
B.Com, DipBus (Finance), INFINZ (Cert).
Simmons Corporate Finance and Mr Simmons have significant experience in the
independent investigation of transactions and issuing opinions on the merits and
fairness of the terms and financial conditions of the transactions.
8.2 Independence
Simmons Corporate Finance does not have at the date of this report, and has not
had, any shareholding in or other relationship with Me Today, King Honey or the
Jarvis Family Trust or any conflicts of interest that could affect our ability to provide
an unbiased opinion in relation to the King Honey Acquisition.
Mr Simmons has an indirect interest in 900
shares in Me Today which are held by a
family trust.
Simmons Corporate Finance has not had any part in the formulation of the King
Honey Acquisition or any aspects thereof. Our sole involvement has been the
preparation of this report.
Simmons Corporate Finance will receive a fixed fee for the preparation of this report.
This fee is not contingent on the conclusions of this report or the outcome of the
voting in respect of the King Honey Resolutions. We will receive no other benefit
from the preparation of this report.
8.3 Declarations
An advance draft of this report was provided to the Board for its comments as to the
factual accuracy of the contents of the report. Changes made to the report as a result
of the circulation of the draft have not changed the methodology or our conclusions.
Our terms of reference for this engagement did not contain any term which materially
restricted the scope of the report.
8.4 Consents
We consent to the issuing of this report in the form and context in which it is to be
included in the notice of special meeting to be sent to the Current Shareholders.
Neither the whole nor any part of this report, nor any reference thereto may be
included in any other document without our prior written consent as to the form and
context in which it appears.
Peter Simmons
Director
Simmons Corporate Finance Limited
2 June 2021
Me Today Limited Page 39 Independent Report
Appendix I
Comparable Companies Transaction Multiples
Transaction Multiples
Date
Target
Acquirer
Enterprise Value
($m)
EBITDA Multiple
Hist. Pros.
Apr 2021 McPherson’s Arrotex 236 11.3x 9.3x
Oct 2020 Global Therapeutics McPherson’s 29 7.4x n/a
Jul 2020 Confidential Confidential 44 n/a 7.0x
Dec 2018 Capilano Honey ROC Capital 230 13.0x 11.5x
Sep 2018 Mānuka Health Hong Leong Group ~360 15.0x n/a
Aug 2018 Nature’s Care Tamar Alliance 843 13.0x n/a
Apr 2018 Trilogy CITIC Capital 250 12.9x 11.4x
Dec 2016 Better Health ORA NZ 130 18.1x 12.1x
May 2016 Global Therapeutics Blackmores 25 7.7x n/a
Dec 2015 Mānuka Health Pacific Equity Partners 110 7.8x n/a
Minimum 7.4x 7.0x
Average 11.8x 10.3x
Median 12.9x 11.4x
Maximum 18.1x 12.1x
n/a: not available
Source: S&P Capital IQ, brokers’ reports, media coverage, company websites
McPherson’s / Arrotex
Arrotex Pharmaceuticals Pty Limited made a non-binding indicative offer to acquire McPherson's
Limited for approximately A$210 million on 28 April 2021 under a scheme of arrangement.
McPherson's Limited provides health, wellness and beauty products in Australia, New Zealand,
Asia and internationally. The company offers beauty care, hair care, skin care and personal care
items including facial wipes, cotton pads and foot comfort products, as well as various kitchen
essentials such as baking papers, cling wraps and aluminium foil.
Global Therapeutics / McPherson’s
McPherson's Limited acquired Global Therapeutics Pty Limited from Blackmores Limited for
A$27.5 million on 26 October 2020.
Global Therapeutics Pty Limited (trading as Fusion Health) produces and sells Chinese herbal
medicines. It provides products for allergies, bones and joints, cold, flu and immune health,
digestion, fatigue, hair and scalp, heart and circulation, kidney and bladder, liver and detoxification
support, memory and concentration, men's health, muscles, tendons and ligaments, skin and nails,
sleep, stress and nervous system, women's health, weight loss and healthy metabolism and vegan
for adults and children over 2 years of age.
Me Today Limited Page 40 Independent Report
Confidential Transaction
A New Zealand company (identity is confidential) acquired the remaining 49% in a New Zealand
company (identity is confidential) (the Target) for $18.7 million in July 2020.
Target is a Mānuka Honey business based in Taranaki. It owns and manages its own hives, as
well as purchasing honey from third party beekeepers and suppliers. It sells bulk and bottled honey
into the New Zealand and export markets.
Capilano Honey / ROC Capital Consortium
A consortium of ROC Capital Pty Limited and Wattle Hill RHC Fund 1, managed by Wattle Hill
Capital, entered into a scheme implementation agreement to acquire Capilano Honey Limited from
Wroxby Pty Limited and others for approximately A$190 million on 13 August 2018. The
transaction was completed on 5 December 2018.
Capilano Honey Limited packs and sells honey under the Capilano brand in Australia and
internationally.
Nature’s Care / Tamar Alliance
China Jianyin Investment Limited and Tamar Alliance Fund, a fund managed by Tamar Alliance
GP 1 Limited, completed the acquisition of a 75% stake in Nature's Care Manufacture Pty Limited
from the Wu family for an enterprise value of A$800 million on 13 August 2018.
Nature's Care Manufacture Pty Limited produces and distributes health food supplements. It also
offers skin care and child care products. The company distributes its products through a network
of retailers in Australia, Asia and the United States.
Mānuka Health / Hong Leong Group
Hong Leong Group is understood to have acquired Mānuka Health New Zealand Limited from
Pacific Equity Partners for between $360 million and $385 million in September 2018.
Mānuka Health New Zealand Limited manufactures natural health and beauty products. The
company offers Mānuka Honey, winter wellbeing, gourmet honey, skincare, oral care and wound
care products, bioactive compounds, nutrients and dietary supplements. Its products are sold
through its distribution network in New Zealand and internationally.
Better Health / ORA NZ
ORA New Zealand Limited, managed by China Diamond Holdings Company Limited, acquired an
80% shareholding in The Better Health Company Limited for $105 million on 16 December 2016.
The Better Health Company Limited manufactures and distributes natural health supplements
under the GO Healthy brand.
Trilogy / CITIC Capital
Citic Capital China Partners III, L.P., a fund of CITIC Capital Partners, acquired Trilogy International
Limited under a scheme implementation agreement for $210 million on 18 April 2018.
Trilogy International Limited manufactures and wholesales home fragrance, body care and natural
products in New Zealand, Australia, the United States, the United Kingdom, Ireland and
internationally. It operates through Home Fragrance, Bodycare, Natural Products and Distribution
segments.
Me Today Limited Page 41 Independent Report
Global Therapeutics / Blackmores
Blackmores Limited acquired Global Therapeutics Pty Limited for A$23 million on 10 May 2016.
Global Therapeutics Pty Limited is described above.
Mānuka Health / Pacific Equity Partners
Pacific Equity Partners acquired Mānuka Health New Zealand Limited from Waterman Capital,
Kerry Paul, Ray Thomson and Milford Asset Management Limited for $110 million on 31 December
2015.
Mānuka Health New Zealand Limited is described above.
Me Today Limited Page 42 Independent Report
Appendix II
Comparable Companies Trading Multiples
Trading Multiples
Company Market
Capitalisation
($m)
Enterprise
Value
($m)
EBITDA Multiple PE Multiple
Hist. Pros. Hist. Pros.
Blackmores Limited 1,420 1,377 20.8x 15.1x 111.0x 34.0x
BWX Limited 772 739 23.9x 17.7x 33.0x 35.1x
Comvita Limited 232 259 9.3x 10.6x 29.9x 24.0x
EZZ Life Science Holdings Limited 21 17 4.7x n/a 5.8x n/a
McPherson’s Limited 194 205 9.8x 10.7x 106.9x 21.2x
Star Combo Pharma Limited 36 19 n/m n/a 17.5x n/a
Vita Life Sciences Limited 56 43 5.0x n/a 8.5x n/a
Minimum 4.7x 10.6x 5.8x 21.2x
Average 12.3x 13.5x 44.6x 35.1x
Median 9.6x 12.9x 29.9x 28.6x
Maximum 23.9x 17.7x 111.0x 35.1x
n/a: not available
n/m: not meaningful
Source: S&P Capital IQ, data as at 1 June 2021
Blackmores Limited
Blackmores Limited develops, sells and markets natural health products for humans and
animals in Australia, New Zealand, Asia, China and internationally. The company offers
vitamins and herbal and mineral nutritional supplements. It also provides products for various
conditions related to arthritis, joints, bones and muscles, brain health, cold, flu and immunity,
digestive health, energy and exercise, essentials, everyday health and eye health. In addition,
the company offers products in the areas of fish and nutritional oils, heart and circulation, infant
nutrition, kids health, men's health, multivitamins, nails, hair and skin, pet health, probiotics,
pregnancy and preconception, stress relief, weight management and women's health. It
provides its products through retail and online channels. The company was founded in 1930
and is headquartered in Sydney, Australia.
BWX Limited
BWX Limited engages in the development, manufacture, marketing, distribution and wholesale
of natural body, hair and skin care products in Australia, the United States and internationally.
The company owns, produces and distributes products under the Sukin, Mineral Fusion,
Andalou Naturals, DermaSukin, Life Basics and USPA personal care brands. It is also involved
in the online sale of its products. In addition, the company provides health, beauty and
wellbeing products sourced from third parties through the Nourished Life e-commerce site.
BWX Limited was incorporated in 2013 and is based in Dandenong, Australia.
Me Today Limited Page 43 Independent Report
Comvita Limited
Comvita Limited engages in the manufacturing and marketing of natural health products in
Australia, New Zealand, China, rest of Asia, North America, Europe, the Middle East, Africa
and internationally. It offers Mānuka Honey, propolis, olive leaf extract, medihoney and
skincare, gourmet honey, elixirs and lozenges, royal jelly, omega 3 and cider vinegar products,
as well as oral, kids and eye health products. The company also engages in the apiary
ownership and management, property ownership and research and development activities.
Comvita Limited was founded in 1974 and is based in Te Puke, New Zealand.
EZZ Life Science Holdings Limited
EZZ Life Science Holdings Limited provides skin care and consumer health products to
retailers and consumers in Australia and internationally. It is involved in the wholesale
distribution of EAORON branded skin care products to pharmacies, supermarkets and
specialist retailers, as well as to other grocery retailers and on-line retailers. The company
also develops, produces and distributes a range of consumer health products under the EZZ
brand to retailers and consumers through online and offline channels. EZZ Life Science
Holdings Limited was founded in 2018 and is headquartered in Silver Water, Australia.
McPherson’s Limited
McPherson's Limited provides health, wellness and beauty products in Australia, New Zealand,
Asia and internationally. The company offers beauty care, hair care, skin care and personal
care items including facial wipes, cotton pads and foot comfort products, as well as various
kitchen essentials such as baking papers, cling wraps and aluminium foil. It sells its products
primarily under its owned brands including Dr. LeWinn’s, A’kin, Manicare, Lady Jayne,
Swisspers, Multix, Fusion Health, Oriental Botanicals, Moosehead and Maseur. The company
was founded in 1860 and is headquartered in Kingsgrove, Australia.
Star Combo Pharma Limited
Star Combo Pharma Limited engages in the manufacture and distribution of health food
products and nutritional supplements in Australia and China. The company operates in 2
segments - Star Combo and Austoyou Retail. It develops, manufactures, markets and sells
natural health supplements and skin care products. The company also provides its products
through an e-commerce platform to Chinese health product consumers and 2 retail stores in
Sydney, Australia. Star Combo Pharma Limited was founded in 2004 and is based in
Smithfield, Australia.
Vita Life Sciences Limited
Vita Life Sciences Limited engages in the formulation, packaging, distribution and sale of
vitamins and supplements. It offers a range of supplements, vitamins, minerals, herbs and
superfoods. The company markets its products through pharmacies and health food stores
under the Herbs of Gold, VitaHealth, VitaScience and VitaLife brands. It operates in Australia,
Singapore, Malaysia, Thailand, Vietnam, Indonesia, China and internationally. Vita Life
Sciences Limited was founded in 1947 and is headquartered in Kirrawee, Australia.
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.