Goldshield Strategic Review
22 June 2007 - 9:01PM
UK Regulatory
RNS Number:8533Y
Goldshield Group PLC
22 June 2007
GOLDSHIELD COMPLETES STRATEGIC REVIEW AND REACHES AGREEMENT WITH DEPARTMENT OF
HEALTH. IT ALSO ANNOUNCES A NUMBER OF DIRECTOR CHANGES
Goldshield Group plc ("Goldshield" or the "Company") today announces that it has
completed its strategic review. As a result, the Group is to focus upon its core
activity Pharmaceutical and Healthcare businesses. Further as was announced
earlier today, The Company has reached an agreed #4m settlement with the English
Department of Health ("DoH") regarding the alleged conspiracy surrounding the
sale of the anticoagulant drug, warfarin.
* Goldshield to focus upon Pharmaceutical and Healthcare businesses
* Rakesh Patel to become Chief Executive
* Ajit Patel and Kirti Patel have decided to resign to focus their
attention upon the case with the SFO
* Board to be strengthened by the appointment of a new finance director
and two new non-executive directors
* Certain Indian business and assets to be sold
* Pharmaceutical division seeking to acquire new products
* Ken Pelton and Peter Brown to retire at next AGM
Commenting on the announcement, Keith Hellawell, Chairman, said:
" The strategic review highlighted the significant potential of our
Pharmaceutical and Healthcare operations.
Within Pharmaceuticals many of the major drug companies are looking to sell
products which have or are coming off patent. Goldshield has a strong track
record of buying and developing these drugs. The Healthcare business also has
opportunities. For example, there are major changes to UK and European drug
regulation and these will demand that companies create an internal
infrastructure if they wish to stay in the sector. Within Goldshield we have
this expertise and structure already and this provides us with an important
advantage.
Our distribution platform spreads across the Healthcare systems of sixty
countries and we plan to use this potential to grow sales.
The settlement with the DoH is important and, I believe that it will help to
re-build our relations with the NHS.
We are grateful to Ajit and Kirti Patel for their contributions to the Company
since its formation. We recognise that their resignations are necessary to allow
them sufficient time to prepare for their cases.
The focus of Goldshield is our core business. I am confident that with
management putting its energies in to these areas that we will see a return to
growth."
- ends -
Date: 22nd June, 2007
For further information:
cityPROFILE
Jonathan Gillen / Simon Courtenay
020-7448-3244
Goldshield Group plc
Date: 22 June 2007
Goldshield Group plc
GOLDSHIELD GROUP PLC COMPLETES STRATEGIC REVIEW AND REACHES AGREEMENT WITH
DEPARTMENT OF HEALTH. IT ANNOUNCES ALSO A NUMBER OF DIRECTOR CHANGES
On 10 April 2007 Goldshield Group plc ("Goldshield" or the "Company"), the
pharmaceutical and healthcare company, announced that it was considering the
demerger of its Pharmaceuticals and Wellbeing divisions as part of a general
strategy review. Today, the Company is pleased to announce the outcome of this
strategic review and the future direction of the Company, set out more fully
below.
Further, in a separate announcement made earlier today, the Company announced
that it has reached an agreement with the Department of Health ("DoH") regarding
the alleged conspiracy to defraud arising from the sale of the anticoagulant
drug, warfarin. As the statement issued jointly with the DoH earlier today
details, the Company admits no wrong-doing. The Company is pleased to have
resolved this important matter. It is in dialogue with the Scottish and Northern
Irish offices of the DoH, as well as the Serious Fraud Office ("SFO") regarding
outstanding cases.
The Company has been informed that the SFO case against the two Directors of the
Company, being Chief Executive, Ajit Patel, and Chief Operating Officer, Kirti
Patel, will continue and in order to ensure that both individuals have
sufficient time to dedicate to the preparation of their defences, they have
resigned from the Board and Company today. Ajit Patel will be leaving on 2nd
July, 2007 to also devote time to his own businesses and Kirti Patel will serve
his notice period ending 31st December, 2007. These cases are expected to come
to trial in 2008/9.
Rakesh Patel, Finance Director, has been appointed Chief Executive and the
Company will seek to fill the role of Finance Director within approximately the
next six months. In addition, the Board will be strengthened by the appointment
of two new non-executive Directors, one of which will be Nick Woollacott, a main
board member of Latice Group plc (now merged with the National Grid) and until
recently the senior independent director of Enterprise plc, who is expected to
join the Board in August, 2007. In addition, Peter Brown and Ken Pelton have
both announced plans to retire at the next Annual General Meeting.
As part of the strategic review, which is set out in more detail below, the
Company has decided to dispose of some of its non-core assets in India. Ajit
Patel has expressed an interest in acquiring these assets and has entered into a
heads of agreement with Goldshield, details of which are set out below. A
circular is expected to be sent to shareholders in July, 2007 which will include
a notice of an EGM to approve this transaction, which constitutes a related
party transaction under the Listing Rules of the London Stock Exchange.
Strategic Review
The strategic review has demonstrated the considerable potential of the core
Pharmaceuticals and Healthcare businesses which are both being reorganised to
pursue these opportunities.
The Directors believe that a combination of the Company's strong balance sheet,
the work already accomplished to establish low cost operations in India, and its
wide distributor network in Europe and other international markets provides a
good opportunity for the growth of these businesses.
Pharmaceutical Division
The Pharmaceutical Division concentrates on the provision of prescription
medicines and a niche portfolio of over-the-counter medicines. Historically, the
Company's growth in this division has resulted principally from the acquisition
of off-patented pharmaceutical products from major companies such as Novartis,
GlaxoSmithKline and Proctor&Gamble. Over a number of years, the Company has
developed considerable experience in acquiring and developing these products.
However, as debts were repaid between 2001-2005 and the Company's substantial
relocation of its operational and administrative functions to India completed in
2006, product acquisition and development was not the priority. The operational
efficiencies gained have allowed the Company to maintain margins. The Directors
believe that with a strong balance sheet and additional funds to market and
acquire products, this business is capable of being grown once more.
The Directors believe that a key strategy will be to focus on product
development and line extension of new acquired products. The Company will
concentrate on critical care and niche pharmaceutical and healthcare areas.
Through its historical acquisitions, Goldshield has extended its distributor
base to operate in more than sixty countries worldwide, giving access to a wide
customer base of pharmacies, hospitals and doctors. This capability has
encouraged several pharmaceutical companies with little or no international
activity to license their products to the Company.
The Directors believe that selective acquisitions can now be made in niche
therapy areas. These opportunities are being created as a result of
multinational companies focusing their marketing and sales efforts on their
important strategic products, thus disposing of surplus products.
Goldshield has an experienced management team with the industry contacts to
identify acquisition opportunities; the financial resources to secure such
acquisitions which meet the Company's financial criteria and the infrastructure
and distributor base now in place to take on more products profitably into the
business.
Healthcare Division
The European regulatory environment has changed fundamentally. Food supplements,
vitamins, minerals and herbal products were governed by the Medicines Act 1968
with subsequent amendments to this statute in more recent years clarifying the
formulations and claims permissible. This however still left significant
ambiguity in the marketing of these products, especially in other European
markets.
Moreover, the new European Directives, which come into force in 2009 will
require increasing compliance from now up to 2011.
These new requirements place regulatory requirements on all UK and European
organisations which will require them to have access to a medical and regulatory
infra-structure, which Goldshield already has in place in its Pharmaceuticals
Division. As a consequence, the Directors believe that these skills can be
applied to the Healthcare Division and synergies obtained.
In order to improve the process to launch strategic healthcare products, the
Company has started to implement the same disciplines as the Pharmaceutical
Division. We are pleased to report that this has enabled the launch of LIPObind,
a MHRA approved medical device product which has attractive growth
opportunities.
Moreover, by sharing a common approach to new product development, the Directors
believe this will better facilitate the cross selling of products to existing
clients of each of these businesses.
Disposal of certain Indian business and assets
To enable the business to focus both management time and the full resources of
Goldshield on its Pharmaceutical and Healthcare businesses, it has been decided
that the Company will dispose of certain of the non-core Indian businesses and
also to outsource the development of the Wellbeing Healthcare villages and
resort in Goa. The sites identified by the Company will be retained pending
receipt of the planning approvals at which time they will be co-developed.
Ajit Patel has expressed an interest in acquiring these non-core assets and has
entered into a heads of agreement with Goldshield, summary details of which are
set out below.
Ajit Patel, or a company controlled by him, will purchase the entire issued
share capital of Goldshield Business Solutions Private Limited (GBSPL), an
Indian incorporated wholly owned subsidiary of Goldshield for a consideration of
INR 110 million (approximately #1.4 million). The consideration will be payable
in cash on completion and will be applied to general corporate purposes. GBSPL
will be required by 28th February, 2008 to change its name to Sanda Business
Solutions and the Goldshield name will revert to the Company.
The gross assets of GBSPL are #1.1 million and the profits attributable to the
division of GBSPL after the apportionment of Group overheads for the year to
31st March 2007 were #0.2 million.
In addition to the sale of GBSPL, Goldshield and GBSPL have entered into an
agreement whereby GBSPL will agree to occupy at least 110 seats at Goldshield's
call centre at Akruti, Mumbai and Goldshield will occupy an equivalent number of
seats at GBSPL's call centre at Verna, Goa. Each company will pay the same cost
per seat to the other and the agreement will stay in force for a minimum of 18
months and is subject to a minimum of a six months' notice of termination. The
purpose of this arrangement is primarily to avoid the need for substantial
relocations of staff.
Goldshield believes that whilst the Indian Wellbeing Villages and resort no
longer form part of the core strategy of the Company, they still have some long
term potential. The Company has decided that it does not wish to allocate
further significant funds to develop these assets. However, it does wish to
retain its existing interests which will be realised when the Directors believe
that shareholder value has been maximised. As part of this strategy, the Company
has also agreed in principle to use its reasonable endeavours to enter into a
joint venture with Ajit Patel to develop care villages on the Guirdolim and
Camurlin sites in Goa, or, if the Board decides to sell these sites, a right of
first refusal for Ajit Patel to acquire them at market value.
Finally, as part of the above arrangements, Ajit Patel, who owns 3.3 million
ordinary shares in the Company, has agreed for a period of one year not to sell
80 per cent. of his current holding and to only sell the remaining 20 per cent.
through the Company's brokers under an orderly market arrangement.
Announcement of preliminary results for the year ended 31st March, 2007
The Company announces that it will be releasing its preliminary results for the
year ended 31st March, 2007 on Wednesday, 27th June, 2007. An analyst's meeting
will be held at 9.30am in the offices of City Profile, 7-9 Copthall Avenue,
London EC2R 7NJ.
Commenting, Keith Hellawell, Chairman, said:
"The strategic review has highlighted the much improved potential of the core
pharmaceutical business and our Healthcare operation. I am confident that the
settlement with the DoH is a very positive step and will help the Company to
focus on these opportunities.
We are grateful to Ajit Patel and Kirti Patel for all their contributions to the
Company since the formation of the Group and recognise that their resignations
from the Board are necessary and important to allow them sufficient time to
prepare for their cases.
We believe that the Wellbeing businesses in India have potential, but we are
keen to focus our efforts on the core pharmaceutical and healthcare businesses.
Accordingly, we have structured this transaction to limit our funding
requirements, but retain an interest in any upside.
I am very excited about the prospects to re-launch our Pharmaceutical and
Healthcare businesses. Moving to India has provided us with a good platform and
the increasing opportunities currently in this sector should allow us to grow
the Company. Settling with the DoH is also welcome."
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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