DATE: 23 May 2022

Silverwood Brands plc

("Silverwood" or the "Company")

Proposed Acquisition of Balmonds Skincare Ltd and Publication of Admission Document

Silverwood Brands plc, an enterprise company established to invest primarily in branded consumer businesses, is pleased to announce that it has  signed a conditional share purchase agreement ("SPA") for the acquisition by the Company of Balmonds Skincare Ltd ("Balmonds"), a UK based skincare company that manufactures cosmetic skincare products primarily for consumers who suffer from skin conditions such as eczema, psoriasis and dermatitis. Balmonds' product line is made from natural ingredients that work to protect and hydrate sore and inflamed skin.

The proposed acquisition of Balmonds ("Acquisition") constitutes a reverse takeover under the AQSE Growth Market Rules and as such will require the approval of Shareholders which will be sought at a general meeting of the Company convened for 9.00 a.m. on 14 June 2022 at VSA Capital's offices at Park House, 16-18 Finsbury Circus, London EC2M 7EB ("General Meeting").

The Admission Document relating to the Acquisition (including the Notice of General Meeting and Form of Proxy) has been published on the Company's website at www.silverwoodbrands.com on Friday 20 May 2022 and is being posted to Shareholders today.  

Details of the Acquisition

On 20 May 2022, the Company  entered into a conditional sale and purchase agreement with Andrew Gerrie and Alison Hawksley (the "Principal Vendors") to acquire their respective shareholdings in Balmonds for a consideration of up to 6,811,389 new Ordinary Shares with a deemed price of 85p per share ("Consideration Price"). The combined shareholdings of the Principal Vendors in Balmonds is equal to 85 per cent. of the issued share capital. The Company is entitled to acquire the remaining 15 per cent. of the issued share capital of Balmonds from the other shareholders in Balmonds (the "Minority Vendors") on the same terms pursuant to "drag along provisions" in the articles of association of Balmonds except the Company may choose to expedite the acquisition process by agreement with the Minority Vendors. The total consideration payable to the Minority Vendors will be up to 1,202,010 new Ordinary Shares with a deemed price of 85p per share.

The total consideration for the Acquisition amounts to up to approximately £8,000,000 and will be satisfied via the issue and allotment of up to 8,013,399 new Ordinary Shares ("Consideration Shares") to the Principal Vendors and the Minority Vendors (together the "Vendors") pro rata to their holdings in Balmonds at the Consideration Price. The Consideration Shares comprise 4,808,039 new Ordinary Shares to be allotted and issued to the Vendors at the time of Admission (the "Initial Consideration Shares") and up to 3,205,360 Ordinary Shares to be allotted and issued to the Vendors after the satisfaction of certain performance and other criteria (the "Deferred Consideration Shares").

The Deferred Consideration Shares shall be issued on or around the third anniversary of Admission subject to certain conditions including the applicable Vendors remaining employed by Balmonds and certain performance targets being satisfied. The number of Deferred Consideration Shares to be issued to the Vendors will calculated on a straight line basis and agreed formula. 

As part of the Acquisition, the Company conditionally acquired a shareholder loan (the "Balmonds Shareholder Loan") advanced to Balmonds by Andrew Gerrie and Alison Hawksley (the "Balmonds Loan Holders"). In consideration of the Balmonds Loan Holders agreeing to novate the Balmonds Shareholder Loan to the Company, 1,398,365 new Ordinary Shares at a price equivalent to the Consideration Price (the "Loan Shares") will be issued to the Balmonds Loan Holders on or around Admission subject to Admission and completion of the Acquisition.

Because the Directors of the Company are also shareholders and as a result of the relationships of the board members and certain Shareholders, a concert party will be formed as a result of the Acquisition (the "Concert Party"). Further information on the Concert Party is given below.

On completion of the Acquisition, the Concert Party will hold 8,445,140 Ordinary Shares on Admission, representing approximately 73.2 per cent. of the Enlarged Share Capital. Under Rule 9 of the Takeover Code, the Concert Party would normally then be obliged to make a general offer to all Shareholders (other than the Concert Party) to acquire all the Ordinary Shares not owned by the Concert Party. The Panel has agreed to waive this obligation ("Rule 9 Waiver") subject to the approval by Independent Shareholders of the Rule 9 Waiver (on a poll) at the General Meeting. The Acquisition is therefore also subject to the approval of the Rule 9 Waiver by the Independent Shareholders.

Approval by the Shareholders will be sought at a General Meeting convened for 9.00 a.m. on 14 June 2022 at VSA Capital's offices at Park House, 16-18 Finsbury Circus, London EC2M 7EB.

The Acquisition is conditional, inter alia, on:

I.      the grant of a waiver of Rule 9 of the Takeover Code by the Panel;

II.     the passing of the Resolutions proposed at the General Meeting of the Shareholdersr;

III.    the passing of the Rule 9 Waiver at the General Meeting by Independent Shareholders; and;

IV.    Admission of the Enlarged Share Capital to trading on the AQSE Growth Market.

Subject to the conditions being satisfied on or before 30 June 2022, the Company will issue and allot to the Vendors pro rata to the shares held by them in the issued share capital of Balmonds as at 20 May 2022:

·      the Initial Consideration at the Consideration Price. Application will be made for the Initial Consideration Shares to be admitted to the AQSE Growth Market on 15 June 2022.

·      such number of Deferred Consideration Shares on or around the third anniversary of Admission calculated in accordance with the agreed formula in the Share Purchase Agreement and subject to the satisfaction of the agreed performance criteria.

The Initial Consideration Shares will represent approximately 41.7 per cent. of the Enlarged Share Capital on Admission and will, when issued, rank pari passu in all respects with the Existing Ordinary Shares, including all rights to all dividends and other distributions declared, made or paid following Admission.

If the total number of the Consideration Shares are issued and allotted pursuant to the terms of the Proposed Acquisition, the Consideration Shares will represent approximately 54.4 per cent. of the Enlarged Share Capital on Admission and will, when issued, rank pari passu in all respects with the Existing Ordinary Shares, including all rights to all dividends and other distributions declared, made or paid following Admission.

Information about the Concert Party

The Company has agreed with the Panel that the following persons are acting in concert in relation to the Company:

·      Andrew Gerrie (Age: 59):
is a director of Silverwood and, together with his wife, Alison Hawksley, shares a number of business interests with the other directors of Silverwood and the individuals set out below. Additional biographical information on Mr Gerrie can be found in the admission document.

·      Andrew Tone (Age: 49):
is the co-founder of Lush Japan, a subsidiary of Lush Cosmetics which Andrew Gerrie co-founded, and has historically worked closely together with Andrew Gerrie. Additional biographical information on Mr Tone can be found in the admission document.

·      Paul Hodgins (Age: 51):
is a director of Silverwood and also has a directorship in Ginger Teleporter Limited together with Andrew Gerrie. They are both shareholders in Ginger Teleporter Limited. Additional biographical information on Mr Hodgins can be found in the admission document.

·      James Wilson (Age: 36):
is a director of Silverwood and also is a partner at Phoenix Asset Management Partners Limited, of which Andrew Gerrie is a non-executive director. Additional biographical information on Mr Wilson can be found in the admission document.

·      Angus Thirlwell (Age: 59):
Angus is the co-founder and CEO of Hotel Chocolat, an AIM quoted company.  Although Andrew Gerrie is the Non-Executive Chairman of Hotel Chocolat, and Angus is a board adviser to Silverwood (due to his specialist brands expertise). Additional biographical information on Mr Thirlwell can be found in the admission document.

·      Alison Hawksley (Age: 55):
is co-owner of Balmonds and CEO/Trustee of MAD 4 AFRICA charity. She is also Mr Andrew Gerrie's wife. She is not a director, officer, employee and/or representative of Balmonds or the Company.

·      Hu Yu (also known as Harry Yu) (Age: 27):
is a shareholder of Silverwood, in addition to being the 20% owner of a subsidiary of Balmonds. He also advises Balmonds on the Chinese market. He is not a director, officer, employee and/or representative of Balmonds or the Company.

·      Fushia Investments PTE LTD
is a family office investment company based in Singapore and a subsidiary of GKG Investment Holdings Pte Ltd, which is controlled by the Goh family. The company participated in Silverwood's pre-IPO fundraise round. The company is registered in Singapore with Unique Entity Number 199901064M and its registered office is at 11 North Buona Vista Drive, #08-08, The Metropolis, Singapore 138589. Its directors are Mr Goh Geok Khim and So Madeline Mrs. Goh Madeline.

·      Silver Americum Ltd:
is a private investment company and registered in England and Wales with company number 12701954. The company's registered office address is at 14 Laurel Road, Barnes SW13 0EE, United Kingdom. Its director is Mr Andrew Gerrie and it is controlled by Mr Andrew Gerrie and Mrs Alison Hawskley.

·      Andrew Monk and Andrew Raca, both directors of VSA Capital Limited, and Jane Raca (the wife of Andrew Raca) hold in aggregate 212,500 shares representing 4.0% of Silverwood's share capital. VSA Capital, the Company's AQSE Corporate Adviser and Broker, however does not hold any shares in Silverwood.

Following Admission, the members of the Concert Party will be interested in a maximum of 8,445,140 Ordinary Shares, representing approximately 73.2 per cent. of the Enlarged Share Capital. A table showing the respective individual interests in shares of the members of the concert party on Admission is set out below:

* Mr Andrew Gerrie holds a 20% stake in the company, Mrs Alison Hawksley holds a 20% stake in the company

** Also known as Harry Yu

Information on Balmonds Skincare Ltd

Balmonds is a manufacturer of cosmetic skincare products primarily aimed at consumers who suffer from skin conditions such as eczema, psoriasis and dermatitis. Balmonds' product line is made completely from natural ingredients that work to protect, nourish, and hydrate sore, inflamed or itchy skin. All merchandise is non-steroidal, no-nut, and unperfumed. Balmonds has a diversified product line suitable for all, but especially helpful to those with sensitive, allergy-prone skin. Balmonds' largest distributers are currently Amazon and Holland & Barrett.

Quality Control

Balmonds take the upmost care in manufacturing, packaging, and shipping products to consumers. For every product, except the Skin Salvation, all batches produced are sent to a laboratory for testing and are certified before being passed to Balmonds' various distribution channels. Previously, every batch of the Skin Salvation was tested and certified. Due to continuous accreditations over the course of many years and the fact that Skin Salvation does not contain water and therefore has no expiry date, Balmonds has moved to one in every five batches of the Skin Salvation being tested instead. Balmonds' quality control practices are above industry requirements.

Manufacturing & Supply Chain Management

Balmonds' primary manufacturing and warehousing facilities are based in the same location as its registered address. The principal ingredients used in Balmonds' products are:

·      Beeswax

·      Natural Oils

·      Herbal Tinctures

·      Shea Butter

Balmonds has a single supplier of unrefined beeswax, the principal ingredient used in Skin Salvation and other products, however it can obtain more from other sources. It also has one supplier of natural oils and another two in reserve (as the primary supplier cannot always supply all the natural oils at one time). Furthermore, Balmonds' herbal tinctures are specially grown in England, and it sources its shea butter from a women's collective in Burkina Faso. It can normally obtain additional ingredients within a two-week period, however, Balmonds' hemp comes from China which poses a geopolitical risk to its operations. Balmonds holds at least one month's stock of finished products on shelves, as well as another two months additional stock in drawdown facilities and warehouses.

Balmonds uses a combination of machinery and labour to manufacture its products. Much of the equipment has been recently acquired and is under warranty whilst some has been leased. If any machine were to break down it would normally take around two to three days to fix. In the meantime labour and the re-introduction of old equipment on-site would ensure production continued, albeit at a slower rate.

The current manufacturing facility has the capacity to increase output between 3x-4x given the introduction of more machinery and labour. At the moment, Balmonds employs one person full-time solely to manufacture its products, however, it also uses temporary staff and other team members as needed. If the maximum productive capacity of the current site were to be reached, Balmonds would need to acquire more storage facilities to house its products.

Balmonds uses numerous suppliers to procure its packaging materials and incorporates recyclable and bio-degradable materials wherever possible.

General Meeting

The General Meeting to seek shareholder approval of, amongst other matters, the Acquisition is convened to be held at 9.00 a.m. on 14 June 2022 at VSA Capital's offices at Park House, 16-18 Finsbury Circus, London EC2M 7EB.

In addition, the Company is seeking approval of the Rule 9 Waiver from Independent Shareholders, waiving the obligation of the members of the Concert Party to make a mandatory takeover offer. The Company is also seeking authority to allot the Ordinary Shares in connection with the Acquisition and an additional authority for up to £5,000,000 in conjunction with a resolution to disapply statutory pre-emption rights.

Assuming that all resolutions will be passed at the General Meeting, it is expected that the Acquisition completes  on Admission.

Application to the AQSE Growth Market

Application will be made for the Consideration Shares and the Loan Shares to be admitted to trading on the AQSE Growth Market. Dealings in the Ordinary Shares are expected to commence on 15 June 2022.

The Consideration Shares and the Loan Shares will, on Admission, rank pari passu in all respects with the existing Ordinary Shares and will rank in full for all dividends and other distributions hereafter declared, paid or made on the ordinary share capital of the Company.

Paul Hodgins, Non-Executive Director, said:

"I am delighted that the Company has been able to contract to acquire this extremely exciting and impressive company."

For more information, please contact:

Capitalised terms defined in the Admission Document published by the Company dated 20 May 2022 shall bear the same meaning unless otherwise defined.

Further details

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

All references to time in this Document are to London, UK time unless otherwise stated and each of the times and dates are indicative only and may be subject to change.

SHARE ADMISSION STATISTICS