QBIOTICS LIMITED AND ECOBIOTICS LIMITED – SCHEMES OF ARRANGEMENT
FREQUENTLY ASKED QUESTIONS
17 August 2017
6 July 2017 - Results of the shareholder votes
QBiotics Scheme Participants and EcoBiotics Shareholders voted in favour of the proposed Schemes of Arrangement. Details of the vote results are available from the QBiotics and EcoBiotics Investor Centre.
1 August 2017 - Schemes of Arrangement approved and implemented
It is noted that the Scheme of Arrangement was successfully implemented following the Federal Court of Australia's approval of the scheme on 31 July 2017 and lodgement of the Federal Court Order with ASIC on 1 August 2017.
15 August 2017 - Implementation Date
Holding statements for QBiotics Group Limited shares have been dispatched to the registered addresses of QBiotics Scheme Participants and EcoBiotics Shareholders.
The frequently asked questions discussed below have been collated based on information contained in the Scheme Booklet. As the Schemes of Arrangements have now been implemented, where the wording in the below responses refers to "if the Schemes become Effective", it can now be read as a matter of certainty.
Key terms of the Schemes of Arrangement
EcoBiotics means EcoBiotics Limited
EcoBiotics IBC means EcoBiotics Independent Board Committee
QBiotics means QBiotics Limited
QBiotics IBC means QBiotics Independent Board Committee
QGL means QBiotics Group Limited
Note: capitalised terms in these FAQs have the same meaning given to them in the Scheme Booklet (Section 13 Glossary).
1. What are the Schemes?
The Schemes are schemes of arrangement between:
- QGL, QBiotics and QBiotics Scheme Participants; and
- QGL, EcoBiotics and EcoBiotics Scheme Participants
If the Schemes become Effective, QGL will acquire all of the QBiotics Shares on issue (other than those held by EcoBiotics) and acquire all of the EcoBiotics Shares.
2. What is the commercial rational for the Schemes when EcoBiotics undertook a demerger in 2015?
EcoBiotics undertook a demerger at the end of 2015 with a view to enable EcoBiotics and QBiotics to better develop financial policies and make other decisions appropriate for their own particular operational and strategic objectives.
In this respect, QBiotics actively pursued steps to prepare for an IPO to enable it to fund its development of EBC46 and wound healing products. Following a review of QBiotics and the appointment of three new directors, Rick Holliday-Smith, Andrew Denver and Professor Bruce Robinson, the QBiotics board considered the market was not conducive to an IPO and that before an IPO was undertaken, regulatory approvals should be obtained and revenue streams be occurring in a way that could be sensibly modelled.
A capital raising was carried out by QBiotics pursuant to a prospectus in mid 2016 to fund the progress of a number of programs in respect of its products.
On further consideration of QBiotics' business, its growth potential and current market conditions the new QBiotics board came to the view late in 2016 that it should investigate a merger of QBiotics and EcoBiotics. It then resolved that in light of EcoBiotics and QBiotics having complementary skills and capabilities a merger would be an appropriate course of action. EcoBiotics has the potential to provide multiple potential new products in a range of indications and QBiotics has significant product development and marketing capabilities. This possibility of merger was put to the EcoBiotics board for its consideration.
For the purposes of considering the Schemes of Arrangement the boards of each of QBiotics and EcoBiotics appointed subcommittees of each board to ensure that there was no commonality between the two boards. Dr Victoria Gordon is a member of the QBiotics board subcommittee (referred to in this Scheme Booklet as the QBiotics IBC) but not the EcoBiotics subcommittee (referred to in this Scheme Booklet as the EcoBiotics IBC) and Dr Paul Reddell is a member of the EcoBiotics IBC but not the QBiotics IBC.
Both subcommittees have given a great deal of thought to the benefits of a merger between the two entities and have each formed the view that such a merger offers significant potential for synergies. The combination of EcoBiotics, a unique and successful discovery company, with QBiotics, a capable development and marketing company, is the basis of a highly successful new entity.
The advantages previously highlighted in the EcoBiotics demerger proposal as to development of a pipeline of bioactive compounds from its discovery and early stage development will be able to be achieved under the proposed merger. Other demerger advantages for EcoBiotics relating to independent decision making as to focus and separation of discovery and development risks are, by their nature, not available in a merged entity. The EcoBiotics IBC, in considering the Schemes of Arrangement has weighed up the benefits of the mergers with advantages and potential outcomes of operating independently.
The advantages and disadvantages of the Schemes are discussed in Section 1 of the Scheme Booklet.
3. What will I be entitled to receive if the Schemes become effective?
If the Schemes become Effective, QBiotics Shareholders will be entitled to receive 1 share in QGL for each QBiotics Share held by them on the Scheme Record Date and EcoBiotics Shareholders will be entitled to receive 0.21 of a share in QGL for each EcoBiotics Share held by them on the Scheme Record Date (expected to be 8 August 2017).
4. Are the Schemes fair and reasonable and in the best interest of QBiotics and EcoBiotics shareholders?
The Directors of both QBiotics and EcoBiotics have requested Pitcher Partners Corporate Finance Limited (Independent Expert) to prepare an Independent Expert’s Report (IER) to the Scheme Participants in relation to the Schemes. The purpose of the IER is to set out whether or not the Schemes are fair and reasonable, and therefore “in the best interests” of the QBiotics Scheme Participants and EcoBiotics Shareholders.
For the reasons set out in the IER included as Annexure A to the Scheme Booklet, the Independent Expert considers the Schemes to be fair and reasonable to, and therefore in the best interest of, EcoBiotics Shareholders and QBiotics Scheme Participants.
We encourage you to read the full IER included as Annexure A to the Scheme Booklet.
5. Where can I find more information about the value of EcoBiotics and QBiotics?
The Independent Expert, in arriving at his conclusions, considered a number of facts in determining valuation ranges for both EcoBiotics and QBiotics prior to the implementation of the Schemes. Please refer to Section 8 and 9 of the IER included as Annexure A to the Scheme Booklet for details of the Independent Expert’s valuation of EcoBiotics and QBiotics respectively.
6. Will I have the same number of shares if the Schemes are implemented?
Following implementation of the Schemes you will have 1 QGL share for each QBiotics Share, and 0.21 QGL share for each EcoBiotics Share, you held prior to the Scheme Record Date.
7. Is QGL planning on listing on a stock exchange?
While no IPO is planned, QGL is likely to be in a better position to consider listing if revenues are either occurring or about to commence from QBiotics products.
8. Who is entitled to receive Shares in QGL, the Scheme Consideration?
Scheme Participants are entitled to receive the Scheme Consideration (QGL Shares) in respect of their shares in either QBiotics and EcoBiotics.
9. Why is EcoBiotics continuing to hold shares in QBiotics?
EcoBiotics is not a Scheme Participant, because if it were to be issued QGL Shares as part of the Schemes and were to stay in the QGL group, EcoBiotics would be required by the Corporations Act to dispose of those QGL Shares within 12 months. On implementation of the Schemes, EcoBiotics and QBiotics will be part of the QGL group.
10. Is EcoBiotics voting at the QBiotics Scheme Meeting?
EcoBiotics will, as a QBiotics shareholder, be sent the notice of the QBiotics Scheme Meeting, but will not vote at the meeting.
11. Why should you vote in favour of resolutions to implement the Schemes?
Reasons why you should vote in favour of the resolutions to be considered at the Scheme Meetings include:
- The Schemes have been unanimously recommended by the QBiotics IBC and the EcoBiotics IBC as being in the best interests of Shareholders.
- The Independent Expert has concluded that the Schemes are fair and reasonable and in the best interests of Shareholders.
- The QBiotics IBC considers QGL's proposal to offer the best outcome for QBiotics Shareholders;
- The EcoBiotics IBC considers QGL's proposal to offer the best outcome for EcoBiotics Shareholders;
- Other reasons are set out in Section 1 of the Scheme Booklet;
- No brokerage or duty is payable on transfer of your QBiotics Shares or EcoBiotics Shares under the Schemes.
12. Why might you consider voting against resolutions to implement the Schemes?
- You may be of the opinion that the Scheme Consideration does not adequately reflect the value of your QBiotics Shares or EcoBiotics Shares.
- You may disagree with the recommendation of the QBiotics IBC and the EcoBiotics IBC and the conclusion of the Independent Expert.
- You may consider the terms of the Schemes or the associated commercial arrangements, including the Conditions Precedent, to be unacceptable.
- You may wish to maintain your current investment profile.
- Other Reasons are set out in Section 1 of the Scheme Booklet.
13. When will I receive the Scheme Consideration?
The Scheme Consideration, (QGL Shares) will be issued by QGL on the Implementation Date (expected to be 15 August 2017).
14. What is the shareholder approval threshold?
In order to become Effective, the Schemes require the approval of Shareholders at the Scheme Meetings by the Requisite Majorities as set out below.
- approval by more than 50% of shareholders present and voting at each Scheme Meeting in person or by proxy, attorney or body corporate representative, unless the Court orders otherwise; and
- approval by at least 75% of the total number of votes cast on the Scheme Resolution at each Scheme Meeting by shareholders.
Even if the Schemes are agreed to by QBiotics Shareholders and EcoBiotics Shareholders at the Scheme Meetings, the Scheme is still subject to the approval of the Court (as well as other Conditions Precedent outlined in Section 12.1(a) of the Scheme Booklet).
15. Are there any conditions to the Schemes?
There are several Conditions Precedent that will need to be satisfied or waived (as applicable) before the Schemes can be implemented.
In summary, as at the Last Practicable Date, the outstanding Conditions Precedent include, among others:
- approval of the Scheme Resolutions by shareholders by the Requisite Majorities;
- approval by the Court;
- no Material Adverse Event occurring; and
- no Prescribed Occurrences occurring.
A list of Conditions Precedent to the Schemes is set out in Section 12.1(a) of the Scheme Booklet.
The EcoBiotics Scheme will not proceed unless the QBiotics Scheme is approved by QBiotics Shareholders. The QBiotics Scheme will not proceed unless the EcoBiotics Scheme is approved by EcoBiotics Shareholders. The EcoBiotics Scheme and QBiotics Scheme are interdependent.
QBiotics and EcoBiotics intend to announce the satisfaction or waiver (as applicable) of the Conditions Precedent to the Schemes on their websites.
16. When will the Meetings be held?
The QBiotics Scheme Meeting for QBiotics Shareholders will be held on 6 July 2017 at 2:00pm. The EcoBiotics Scheme Meeting for EcoBiotics Shareholders will be held immediately following the QBiotics Scheme Meeting.
17. Am I entitled to vote at the Meeting?
If you are a QBiotics Shareholder and are registered at 5pm on 30 June 2017, you will be entitled to attend and vote at the QBiotics Scheme Meeting.
If you are an EcoBiotics Shareholder and are registered at 5pm on 30 June 2017, you will be entitled to attend and vote at the EcoBiotics Scheme Meeting.
18. How can I vote at the Scheme Meeting?
You can vote at a Scheme Meeting, by attending that Scheme Meeting in person. Alternatively, you can vote by appointing a proxy or attorney or, if a company, a body corporate representative to attend the relevant Scheme Meeting and vote on your behalf.
19. Do I have to vote?
You do not have to vote but we encourage all shareholders to either vote at a Scheme Meeting or by appointing a proxy.
20. When will the results of the Scheme Meetings be known?
QBiotics and EcoBiotics intend to announce the results of the Scheme Meetings on their websites shortly after the conclusion of the Scheme Meetings.
Even if the Schemes are approved by the Requisite Majorities, the Schemes are still subject to the approval of the Court and the other Conditions Precedent set out in the Scheme Implementation Agreement and the Schemes of Arrangement.
21. What happens to my Shares if I do not vote, or if I vote against the Schemes?
If the Schemes become Effective and are implemented, any QBiotics Scheme Shares or EcoBiotics Scheme Shares held by you on the Scheme Record Date will be transferred to QGL and you will be issued the Scheme Consideration, notwithstanding that you may not have voted or you may have voted against any of the resolutions to implement the Schemes.
22. Will I have to pay brokerage or duty?
No brokerage or stamp duty is payable by you on the transfer of your Shares under the Schemes.
23. Can I sell my Shares now?
You can sell your Shares at any time before 9am (Brisbane time) on the date of the Scheme Record Date (8 August 2017). The companies intend to refuse to register any transfers of Shares received after 10am (Brisbane time) on the date of the Scheme Record Date (8 August 2017).
24. If the Schemes become Effective, how will my Shares be transferred?
If the Schemes become Effective, each of QBiotics and EcoBiotics automatically have authority to transfer your Shares on your behalf when the Schemes are implemented, and the Scheme Consideration will then be issued to you. However, you should be aware that under the Schemes, you are deemed to have warranted to QGL that (in summary):
- all your Scheme Shares which are transferred to QGL under the Scheme are fully paid and free from all encumbrances on the date of transfer, and
- you have full power and capacity to transfer your Scheme Shares to QGL.
25. What are the taxation implications of the Schemes?
The taxation implications of the Schemes will depend on your personal facts and circumstances.
Section 11 of the Scheme Booklet contains an overview of the Australian taxation consequences for Scheme Participants.
You should seek professional taxation advice with respect to your individual tax situation.
26. If the QBiotics Scheme and EcoBiotics Scheme is implemented, will QGL, QBiotics and EcoBiotics continue to be regulated by the Corporations Act?
Yes, if the QBiotics Scheme and EcoBiotics Scheme is implemented, QGL, QBiotics and EcoBiotics will continue to be public companies regulated by the Corporations Act and the Directors of each of QGL, QBiotics and EcoBiotics will continue to be subject to the duties and obligations set by the Corporations Act.
27. Will the directors of EcoBiotics vote in favour of the EcoBiotics Scheme and will the directors of QBiotics vote in favour of the QBiotics Scheme?
Directors who hold or control shares in EcoBiotics and QBiotics intend to vote those shares in favour of the resolution to implement the Schemes.
28. Does the QBiotics Independent Board Committee recommend QBiotics Shareholders vote in favour of the QBiotics Scheme?
The QBiotics IBC unanimously recommends that QBiotics Shareholders, vote in favour of the resolution to implement the QBiotics Scheme at the QBiotics Scheme Meeting.
29. Does the EcoBiotics Independent Board Committee recommend EcoBiotics Shareholders vote in favour of the EcoBiotics Scheme?
The EcoBiotics IBC unanimously recommends that EcoBiotics Shareholders, vote in favour of the resolution to implement the EcoBiotics Scheme at the EcoBiotics Scheme Meeting.
30. Will the QBiotics Scheme proceed if the EcoBiotics Scheme is not approved by EcoBiotics Scheme Participants?
No, the QBiotics Scheme is conditional on the EcoBiotics Scheme being approved. If the EcoBiotics Scheme is not approved, the QBiotics Scheme will not proceed and QBiotics Scheme Participants will retain all of their existing shares.
31. Will the EcoBiotics Scheme proceed if the QBiotics Scheme is not approved by QBiotics Scheme Participants?
No, the EcoBiotics Scheme is conditional on the QBiotics Scheme being approved. If the QBiotics Scheme is not approved, the EcoBiotics Scheme will not proceed and EcoBiotics Scheme Participants will retain all of their existing shares.
32. Will QGL control QBiotics and EcoBiotics if the Schemes are implemented?
Yes, QBiotics and EcoBiotics will become controlled by QGL.
33. Who will manage QGL, QBiotics and EcoBiotics if Schemes are implemented?
The current QGL directors are Roderic Holliday-Smith, Dr Victoria Gordon and Dr Paul Reddell. Following the implementation of the Schemes it is expected that further directors will be appointed.
QGL does not intend to make changes to the management teams of QBiotics and EcoBiotics as a result of the Schemes subject to potentially changing employer so that all employees are employed by QGL or a wholly owned subsidiary of QGL.
34. Where can I get further information?
If you have any questions in relation to this Scheme Booklet or the Schemes, you can call or email QBiotics or EcoBiotics or consult your financial, legal, taxation or other professional advisor.