HIGH profile Western Australian weight loss group The Metabolism Centre has signalled a major challenge to the weight loss market by going to the Australian Stock Exchange to fund a national roll out.
HIGH profile Western Australian weight loss group The Metabolism Centre has signalled a major challenge to the weight loss market by going to the Australian Stock Exchange to fund a national roll out.
The company is to be bought by technology shell Mustang Group, headed by Mark Pearce, in a staggered deal that, if successful over two years, will result in an effective reverse takeover of the listed entity.
The deal has been valued at almost $11 million if all performance hurdles are met.
From its founding in Subiaco by exercise physiologist David John in 1998, The Metabolism Centre has grown to five centres in WA and seven in Victoria, mainly in the past year under the direction of ex-St George Bank State manager and former BC The Body Club managing director Jim Cowling.
“What we are looking to do is take it completely national and to do that we needed capital,” Mr Cowling said.
The group wants to add about 40 more sites around the country within 18 months, challenging more traditional weight loss names such as Weight Watchers, Jenny Craig and Herbalife.
The Metabolism Centre claims to use cutting-edge science in its largely self-administered programs that rely on tests conducted on a machine designed and manufactured for it by WA-based Calchek Pty Ltd, which boasts cricket legend Dennis Lillee as an investor.
Mr Cowling said the machines were a cheaper version of hospital-grade machines, allowing his company to make its service affordable in the suburbs.
Each centre costs about $80,000 to establish.
He said about 6,000 people had been tested by The Metabolism Centre since the start of 2003, with the test prices beginning at $320 in Perth and $425 in Melbourne.
While the various players involved struggled to place a definite dollar value on the deal, due to its duration and performance targets, the first and smallest stage of the deal amounts to a raising of $800,000 through Argonaut Capital’s retail associate Siafu Securities to provide working and expansion capital.
Mustang will be renamed Metabolic Diagnostics if the deal is accepted by shareholders.
After the first raising Metabolism Centre shareholders can creep up the Mustang register if they meet or exceed profit targets for the end of the current and following financial years.
For Mr Cowling and his associates to increase their shareholding in Mustang, The Metabolism Centre must produce earnings before interest, tax, depreciation and amortization of at least $2 million by June 30 2004 and at least $5 million EBITDA by June 30 2005.
To take the full allotment on offer, an amount that would take the current shareholders of The Metabolism Centre to more than 50 per cent of Mustang, the health group must produce EBITDA of $4 million or more by June 30 2004 and $10 million by June 30 2005.
Argonaut director Eddie Rigg said the rising issue of obesity and the way The Metabolism Centre was targeting it had made the company an attractive investment proposition.
“This is a huge market, pardon the pun,” he said.
