LIFEBRANDZ is proposing to undertake a 50-to-1 share consolidation, followed by a rights issue that it will use to repay advances from two shareholders.
LifeBrandz said last Friday night that its board believes a share consolidation will reduce the volatility of its share price and reduce fluctuations in the company's market capitalisation. LifeBrandz shares fell 0.1 cent or 12.5 per cent to S$0.007 last Friday.
Subject to the completion of the share consolidation, Lifebrandz also intends to undertake a renounceable non-underwritten rights issue of up to 305.8 million new shares at an issue price of S$0.028 for each rights share, on the basis of 25 rights shares for every one consolidated share in Lifebrandz.
The issue price of S$0.028 per rights share represents a discount of approximately 93 per cent to the closing price of S$0.40 per share on Jan 30, after adjusting for the proposed share consolidation.
The issue price of S$0.028 also represents a discount of approximately 33.8 per cent to the theoretical ex-rights price of S$0.042 per share after adjusting for the proposed share consolidation.
Currently, LifeBrandz has a share capital of 611.7 million shares after completing a recent placement exercise.
LifeBrandz will have a share capital of approximately 12.2 million shares following the proposed share consolidation.
This means that in the maximum subscription scenario, up to 305.8 million rights shares will be issued. The rights shares would represent approximately 2,500 per cent of the consolidated share capital and approximately 96.2 per cent of the enlarged issued share capital of the company after the rights issue.
The rights issue is expected to raise net proceeds of S$6.55 million in the maximum subscription scenario, after netting off S$1.86 million to pay off shareholder advances and S$160,000 to pay professional fees and expenses.
In the minimum subscription scenario, the rights issue will raise only S$17,000 after fees.
LifeBrandz has received irrevocable undertakings from two shareholders -- Bounty Blue Capital and Capital Square Co -- to subscribe for a portion of their total entitlements.
However, their subscriptions will be scaled down to prevent either shareholder from having to incur a mandatory general offer obligation under the Takeover Code if interest in the right issue is poor.
Bounty Blue holds a 25.36 per cent stake in LifeBrandz. Capital Square has a 12.26 per cent stake. (see amendment note)
Bounty Blue will subscribe for around 59.2 million rights shares, out of its pro rata entitlement of 77.6 million shares. This will result in an aggregate subscription amount of S$1.657 million, which will be set-off against the S$2.1 million that Bounty Blue had previously advanced to LifeBrandz. The Bounty Blue advances are not interest bearing and not secured by capital.
Capital Square will subscribe for at least 7.1 million rights shares out of its pro rata entitlement of 37.5 million rights shares for an aggregate subscription amount of S$200,000, which will be used to offset the S$200,000 that Capital Square had previously advanced to LifeBrandz. These advances bear interest at the rate of 5 per cent per annum.
Assuming that no shareholders other than the undertaking shareholders subscribe for the rights issue, then in the minimum subscription scenario, the issued rights shares will represent approximately 51.7 per cent of the consolidated share capital and approximately 34.1 per cent of the enlarged issued share capital of the company.
LifeBrandz will seek shareholders' approval for the share consolidation and rights issue at an extraordinary general meeting to be convened.
Amendment note: An earlier version of this story misstated Bounty Blue's and Capital Square's stakes in Lifebrandz. We apologise for the error.