07/11/2019 - 15:44

Bodybuilder strikes $85m ASX deal

07/11/2019 - 15:44

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Perth bodybuilder Danny Pavlovich is planning a stock market listing of his business Nutrition Systems, which has quietly grown to become one of Australia's leading suppliers of supplements with annual sales of $50 million.

Perth bodybuilder Danny Pavlovich is planning a stock market listing of his business Nutrition Systems, which has grown to become one of Australia's leading suppliers of supplements with annual sales of $50 million.

The stock market listing will be via a reverse takeover of local biotech company OBJ, which announced today it would pay $85 million for Export Corporation (Australia) Pty Ltd, the owner and operator of Nutrition Systems.

Established by Mr Pavlovich in 1991, Nutrition Systems was one of the first companies in Australia to import health, wellness and sports nutritional products from the US.

It employs about 60 people and supplies hundreds of retailers across Australia and New Zealand including Woolworths, Coles, IGA, Chemist Warehouse, Costco and many specialty stores.

It also distributes products online, including through Nutrition Zone, Elite Supplements, Supps R Us, and Supplement Mart.

Its financial performance was publicly revealed for the first time today, when OBJ lodged financial statements for Export Corporation (Australia) with the ASX.

They show the business had sales revenue of $23.1 million and a net profit of $2.3 million in the half year to December 2018.

It performed even better in the prior period, with sales of $27.6 million and a net profit of $4.2 million in the half year to December 2017.

The company is debt free and has retained profits of $51.6 million, indicating it has been consistently profitable over many years.

The transaction has brought together several prominent deal-makers.

OBJ’s board includes Steven Schapera, the founder of BECCA Cosmetics, which was bought by Estee Lauder for $US230 million in 2016.

The OBJ board is chaired by New York-based Tony Varano, who was formerly chairman of BECCA.

Another notable investor in BECCA was John Poynton, whose company Jindalee Partners has been advising OBJ.

OBJ company secretary John Palermo also had a key role. His company Gratia Holdings (trading as Palermo Chartered Accountants) will be paid a cash fee of $1.48 million (1.75 per cent of the total consideration) for introducing the parties.

OBJ and Export Corporation (Australia) both have their registered office at 284 Oxford St, Leederville, which is the premises of Palermo Chartered Accountants.

The deal marks a big shift for OBJ, which has been focused on the development of a range of drug delivery and health products and devices.

OBJ has agreed to pay a total of $85 million for Nutrition Systems, comprising $50 million in cash and the balance in shares.

It will pay $40 million on settlement of the deal, with two further payments of $5 million to be made 12 months and 24 months after settlement.

The $35 million of shares will be issued in three tranches, over a period of three years.

The final tranche, worth $15 million, will be subject to performance adjustments.

The purchase includes a warehouse in NSW valued at $12 million and stock and debtors of $23 million.

OBJ plans to raise up to $50 million through a share placement and also plans to seek a debt facility of up to $20 million.

It has engaged Hong Kong-based TTB Partners as lead manager to provide corporate advisory and services in relation to the capital raising.

It has proposed that Mr Pavlovich will join its board of directors and plans to change its name to Wellfully Limited.

That’s in keeping with its description of Nutrition Systems as a distributor of nutritional wellness products.

OBJ said it did not intend to cease or dispose of any of its existing business and operations.

OBJ noted that Nutrition Systems maintains an internal and external compliance team dedicated to ensuring product safety, efficacy and compliance with the regulations of the Therapeutic Goods Administration.

Nutrition Systems hit regulatory problems seven years ago, when the Federal Court fined the company $3.1 million for importing products that were not on the Australian Register of Therapeutic Goods.

The TGA said at the time that Nutrition Systems imported over 35 different products that were not approved, including nutritional and weight loss products as well as body building, muscle growth and vitamin products.

The court accepted the contraventions were not deliberate or systematic.

Mr Pavlovich was a finalist in the EY Entrepreneur of the Year program in both 2007 and 2018.

 

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