VETSHARE LIMITED ACN INFORMATION MEMORANDUM

Transcription

1 VETSHARE LIMITED ACN INFORMATION MEMORANDUM Dated 4 March 2014

2 Important Information This Information Memorandum ( Memorandum ) is dated 4 March 2014 and was prepared and is issued by VetShare Limited ACN ( VetShare ). Under this Memorandum, VetShare offers to issue ordinary fully paid Shares in VetShare to those of its shareholders who are able to receive and accept the Offer as sophisticated or professional investors or too whom VetShare could otherwise make the offer in accordance with the Corporations Act (the Offer ). Purpose: This Memorandum is for the use of current investors in VetShare to assist them in considering whether to increase their investment in VetShare. It is not, nor does it purport to be, allinclusive or to contain all the information that may be required by an investor to evaluate the Offer, the value of VetShare s shares or the nature and prospects of VetShare s business. It is not a regulated disclosure document under Chapter 6D or Chapter 7 of the Corporations Act 2001 (Cth) and has not been lodged with the Australian Securities and Investments Commission. As such, this Memorandum and the Offer are only available to VetShare shareholders who are sophisticated investors or professional investors as referred to in section 708 of the Corporations Act and such other persons to whom the Offer may be made without a disclosure document in accordance with the Corporations Act. By accepting the Offer, an investor represents and warrants that they are a sophisticated investor or professional investor as defined in section 708 of the Corporations Act, or are otherwise able to receive and accept the Offer without the requirement for a disclosure document. VetShare is not obliged to accept any purported acceptance of the Offer unless such acceptance is strictly in accordance with the Offer as set out in this Memorandum, and directors generally retain the discretion to accept or reject any application for shares as they see fit. Unless otherwise agreed by VetShare s directors, any acceptance of the Offer must be made on the Application Form which accompanies this Memorandum. No Recommendation: This Memorandum is not, and should not be construed as, a recommendation to subscribe for Shares under the Offer. No person has been authorised by VetShare to give any information or make any representation not contained in, or not consistent with, this Memorandum. In all cases, prospective investors should conduct their own investigations and analysis of the terms and conditions of the Offer, VetShare s financial condition and business affairs, and the contents of this Memorandum. None of VetShare or its directors, officers, consultants, employees, agents or advisers (the VetShare parties ) have considered the objectives, financial situation or needs of any prospective investor. Accordingly, each prospective investor contemplating accepting the Offer must make (and will be deemed to have made) their own independent investigation and appraisal of the financial, commercial, taxation, and legal aspects associated with an investment in VetShare shares and should seek independent expert advice in relation to those matters which is referrable to their own objectives, financial situation and needs. Exclusion of Liability - Each of VetShare and the VetShare parties: Makes no warranty or representation (express or implied) as to the currency, accuracy, reliability or completeness of the contents of this Memorandum; To the maximum extent permitted by law, disclaims all liability for any loss or damage (including consequential loss or damage), suffered or incurred by any investor or any other person however caused (including negligence) as a result of the use of, or reliance on, this Memorandum. In any event, the collective total liability of VetShare and the VetShare parties will not exceed the amount that any investor invests in VetShare, and will be limited to any direct loss incurred by the investor; and Is under no obligation to correct, update or revise the Memorandum or anything referred to in the Memorandum which comes to their attention whether as a result of a new circumstance affecting VetShare or otherwise. Forward-Looking Statements - This Memorandum contains statements and information which are forward-looking. Such forward-looking statements and information are based on assumptions which are not necessarily detailed in this Memorandum and which may not prove to be accurate. Accordingly, actual results of VetShare and the investment may differ materially from those expressed in any forward-looking statements made herein. Privacy - Prospective investors who are natural persons should note that if they apply for VetShare shares, they will be asked to provide personal information to VetShare in the Application Form. VetShare will collect hold and use that personal information to provide facilities and services to such investors and undertake appropriate administration. Under the Corporations Act, VetShare is required to maintain certain information in its register of members. Access to the information may be provided to VetShare s agents and service providers on the basis that they deal with such information in accordance with the Privacy Act 1988 (Cth). Under the Privacy Act 1988 (Cth), relevant prospective investors may request access to their personal information held by VetShare by contacting VetShare s company secretary. Page 2 of 32

3 A Note from the Chairman On behalf of the Board of VetShare Limited, I am pleased to present this Information Memorandum to you, offering current shareholders the opportunity to increase their investment in VetShare while at the same time providing essential capital to your company. VetShare is Australia s newest and fastest growing veterinary wholesaling company and has been trading for around a year and a half. The company is currently owned by more than 200 shareholders, most of whom are veterinarians, with the balance of shareholders being VetShare employees and other industry stakeholders. We are proud to present VetShare as the only publicly-owned Australian veterinary wholesaler which is vet owned for all vets. VetShare was capitalised via a prospectus in March Sales to practices are now averaging $1 million per month. Whilst the business is not yet at monthly break-even, the management team has an aggressive plan underway for this to occur before the end of the financial year. VetShare now requires additional capital to fund the anticipated cash shortfalls prior to reaching break-even, to fund its growing stock requirements, to broaden its customer base and to enable it to explore exciting new opportunities as they arise. Therefore, we are now offering selected shareholders the opportunity to acquire fully paid ordinary shares in VetShare which will support the future development of the company. Yours faithfully. Mark Ethell Chairman VetShare Limited Page 3 of 32

4 Part 1: Offer Summary What s on Offer Fully paid ordinary shares in VetShare Limited The Offer is limited to existing shareholders in VetShare who are able to receive and accept the Offer without the need for a regulated disclosure document in accordance with the Corporations Act. VetShare is placing a minimum limitation on the capital raising of 1,000,000 shares ie $500,000 being an increase of 20.5% on VetShare s current shareholder base. While no maximum has been placed on the amount to be raised under this Memorandum, if applications for Shares exceed 2,000,000 shares (being an increase of 41% of the current shares on issue), VetShare directors would consider the immediate and future uses for the additional capital and may elect to reject some applications in whole or in part and return the application monies in excess of $1,000,000. Offer Price $0.50 per share This offer price is reflective of VetShare s net tangible asset backing per share as at 31 December 2013 and represents a 50% reduction on the application price for shares acquired under the company s initial public offering in March As such, investors under the Offer have the opportunity to reduce the average cost of their VetShare shares. Minimum investment $500 (1,000 shares) Offer Opens Tuesday 4 March 2014 Offer Closes 5.00pm Friday 28 March 2014 for applications received up to that time, unless closed earlier in accordance with this Information Memorandum. Page 4 of 32

5 Purpose of the Offer To raise working capital to help fund VetShare s cash shortfalls prior to reaching break-even and to fund continuing growth and development. Who may accept the Offer As at the date of this Memorandum, the Offer is limited to current shareholders in VetShare who are able to receive and accept the Offer without the need for a regulated disclosure document. Related parties of existing shareholders (eg, spouses, children, family trusts and SMSFs) may also accept the Offer. Only sophisticated and professional investors (as defined in the Corporations Act 2001 (Cth) and other persons selected by VetShare and to whom an offer may be made without a regulated disclosure document may accept the Offer included in this Information Memorandum. Persons who accept the Offer on the basis that they are a sophisticated or professional investor will be requested to provide evidence of such status including (for sophisticated investors) a certificate from an accountant attesting to the investor s income or assets (see Attachment 1). How to Accept the Offer To accept the Offer, investors must: (1) Complete the Application Form attached to this Information Memorandum; and (2) Pay the subscription price of $0.50 per share either by cheque made out to VetShare Limited- Share Offer Account or by payment into the following bank account: Bank: Account name: Commonwealth Bank of Australia VetShare Limited Share Offer Account BSB: Account No.: In addition, if required, the investor must provide such documentation as is required by VetShare to evidence their status as a sophisticated or professional investor as described in section 708 of the Corporations Act. Send the Application Form including your cheque or EFT receipt to: Page 5 of 32

6 VetShare Limited 98 Long Street Smithfield, NSW Attention: Share Offer Administrator Issue Date Who can Investors contact to discuss the Offer? Shares will be issued and allotted based on applications made under the Offer on or before Friday 11 April 2014 Mark Ethell Chairman, VetShare Limited Tel: Paul Rennie Managing Director, VetShare Limited Tel: Part 2: About VetShare s Business a. Industry overview The veterinary industry is comprised of about 2,000 veterinary practices spread throughout Australia servicing companion, production and exotic animals. The majority are situated on the east coast of Australia and are either companion animal practices or mixed practices with a large companion animal component. Most of these practices are small businesses owned by individual veterinarians or a small group of partners. There is one public company (Greencross Ltd) that has acquired approximately 100 practices across eastern Australia and a small number of group practices owned privately. Veterinary practices source their supplies from veterinary wholesalers based throughout Australia. The wholesale market is dominated by three large companies, two of which are owned by multinational companies and one of which is an unlisted public company but majority owned and controlled by a single shareholder. Wholesalers are required to provide the complete range of products that practices need to maintain their businesses including prescription medicines, animal health products, specialised equipment, over the counter products, pet foods and consumables. Page 6 of 32

7 Veterinary wholesalers source products from a wide range of manufacturers and distributors ranging from some of the world s largest animal health and pet food companies to small local niche providers. b. VetShare s History VetShare was founded to fill a market space left when two major veterinary wholesalers were sold to multinational companies in the past four years. These companies had been owned for many years by Australian veterinarians. VetShare s vision is to be owned and controlled by veterinarians for the benefit of all vets, both as shareholders and customers. The vision was turned into reality by the work of Mark Ethell, a veterinarian and specialist equine surgeon who owns small animal and equine practices in Canberra, and Paul Rennie who has many years of experience in the veterinary industry at senior management level. They have been joined on the Board by practising veterinarians and independent directors with wide business experience. VetShare was launched as an unlisted public company by an initial share offer in March 2012 which raised $4 million to establish the company. The share offer was nearly 50% oversubscribed, such that VetShare received applications for almost $6 million of which nearly $2 million needed to be returned to applicants. There are now over 200 shareholders representing about 150 veterinary practices. VetShare employs around 15 people, the majority of whom have worked in the veterinary industry for many years. A warehouse was established at Smithfield in Sydney and the company s first sales to practices were made in September Veterinary sales are now averaging $1 million a month, with December 2013 being a record for our sales to veterinary practices of $1,350,000. This growth has brought with it some significant challenges, most particularly with regard to cash flow. The cash required with increasing inventories and costs associated with supplying a still somewhat scattered and fragmented customer base has placed enormous pressure on the resources needed to maintain the business and support continuing growth. This pressure on cash was always identified as a risk to the business and acknowledged again in our 2013 Annual Reports. It is projected that break-even will be achieved by the end of the 2013/14 financial year, as VetShare realises savings and efficiencies as described in this Memorandum. c. VetShare s Products and Services VetShare s core business is to supply veterinary practices with the complete range of products that they may need to maintain their businesses in an efficient and competitive manner. It has also developed some strategic alliances to benefit its customers in areas such as management training and practice building development. VetShare is also in an excellent position and have the high level skills to provide advice and support to help practices improve their operations. In particular, VetShare has a unique ability to independently advise and train on the use of two of the major veterinary practice management software systems. Page 7 of 32

8 d. Major Markets and Marketing Strategies VetShare sees the east coast of Australia as its primary market in the short to medium term and its shareholders practices as its natural customer base. Since establishment, VetShare s marketing strategy has been directed at converting its shareholders practices into customers. This is seen as a dual benefit to veterinary shareholders, as the value they input to the company as customers ultimately adds to the underlying value of their own shares. Interested non-shareholder practices are also being approached and added as customers. There is widespread interest in a veterinary-owned wholesaler and many veterinarians willing to support a company that they see as theirs even if they are not yet shareholders. Currently, VetShare has approximately 80 customers across Australia s east coast, from Tasmania to as far north as central Queensland. The majority of customers are based in NSW and the ACT. Marketing strategies have been developed to approach and recruit shareholder practices as rapidly and efficiently as possible. Shareholders are far more likely to commit to changing suppliers to a company they own, rather than those without a connection. The sales team is led by Managing Director Paul Rennie and Business Manager Cath Colton with support from territory managers on the road. Interested practices are approached in a strategic, structured manner and the process of induction managed as quickly as possible. Non-shareholder practices are also encouraged as customers and are approached by our sales team on the road on a regular basis and at veterinary conferences and other professional meetings. In some cases, products may need to be coded in practice computer systems and ordering patterns determined before substantial sales can commence. VetShare has developed a sophisticated electronic interface and web-based ordering system that interacts with a number of practice management software systems. VetShare is focussed on excellent customer service and a highly developed professional customer relationship as its point of difference in the wholesale market. VetShare has attended most major veterinary conferences to position itself as a competitive company and raise its profile as a significant player in the veterinary industry as well as to identify and develop relationships with potential customers. It has also established a partnership with the Australian Veterinary Business Association to support its WellMap project that is seeking to identify and benchmark what defines excellent veterinary practices. Veterinary practice owners are very conscious of the reward programs and credit card arrangements that their wholesalers offer. VetShare has established a points-based reward program (VetPoints) that offers the most flexible and attractive reward points system in the veterinary industry. Credit card payment opportunities are also very flexible and can be used to meet different practice requirements. Page 8 of 32

9 e. Main Suppliers VetShare has supply agreements with over 30 suppliers including all major veterinary manufacturers and distributors including Bayer, Zoetis, Elanco, Merial, Novartis, Hills, Royal Canin, Advance, Eukanuba and Idexx. As at 31 December 2013, the total number of suppliers is 96, where below is the list of our major suppliers: 1 Apex Laboratories Pty Ltd 11 Merial Australia Pty Ltd 2 Australian Veterinary Serum Lab 12 MSD Animal Health 3 Bayer Australia Limited 13 Norbrook 4 Boehringer Ingelheim Pty Ltd 14 Novartis Animal Health Australasia 5 Ceva Animal Health Pty Ltd 15 Proctor & Gamble 6 Dermcare Vet Pty Ltd 16 Royal Canin Australia Pty Ltd 7 Eli Lilly Australia Pty Ltd 17 Sigma Pharmaceuticals Limited 8 Hills Pet Nutrition Pty Ltd 18 Troy Laboratories Australia Pty Ltd 9 Jurox Pty Ltd 19 Virbac Australia Pty Ltd 10 Mars Petcare Australia 20 Zoetis Australia Pty Ltd f. VetShare s Competitive Advantages The veterinary wholesale market is dominated by three large national companies that have customers in all Australian states. - Provet is the largest of the three and is owned by Henry Schein, a major North American veterinary and dental supplier. - Lyppard is owned by Symbion which in turn is owned by EBOS, a multinational company based in New Zealand. - Cenvet is the third player and is an unlisted public company majority owned and controlled by a single shareholder. Both Provet and Lyppard started as cooperatively-owned veterinary-controlled wholesalers that operated as such for over 30 years before their recent sale to multinational companies. VetShare is the only veterinary wholesaler in Australia which: Is proudly wholly Australian owned, and Has a shareholder base comprising a substantial majority of veterinarians, and Can properly claim to be vet owned for all vets VetShare considers these points to be major competitive advantages in identifying with and appealing to its customer base. Other aspects of VetShare s offering to customers which are designed as competitive advantages include: VetShare offers enhanced customer service and a deep understanding of the veterinary industry and the issues facing Australian vets Page 9 of 32

10 VetShare is able to offer same day service for urgent deliveries within the greater Sydney region VetShare has generally been able to offer its customers pricing which matches or betters that of its competitors VetShare has developed and is continuing to improve its web-based customer interfaces to make ordering simple and efficient VetShare has developed a range of strategic alliances with other service providers to the veterinary industry, and through these alliances is able to offer advantageous service delivery and pricing to its customers. Page 10 of 32

11 Part 3 - VetShare s Plans a. The Customer Base Since its inception, VetShare has spent most of its corporate energy on developing and enlarging its customer base. As part of this, VetShare has adopted systems and strategies to provide services and support to its customers. VetShare has been highly successful in developing relationships with its shareholders and bringing shareholders on as customers. Of its current customer base, more than 75% are also shareholders of VetShare. VetShare plans to continue to increase its customer base by: continuing to encourage non-customer shareholders to become customers of VetShare giving greater focus to non-shareholder vet practices in an effort to bring them on board as new customers Growth will be further enhanced by encouraging existing customers to direct a higher proportion of their practice purchasing through VetShare. Annual sales are expected to increase from $8.7 million for FY13 to about $15 million for FY14. b. Profitability The second of VetShare s major objectives since inception has been to get to a point where its income equals or exceeds its expenses on a month by month basis. That is, to reach break-even and then move to profitability. As noted in Part 2(b) in this Memorandum and at VetShare s 2013 Annual General Meeting, assuming VetShare continues to meet its sales budgets and projections, and continues to control its costs, VetShare expects to reach break-even in the final quarter of the financial year. The challenge of reaching profitability has led to the Board and Management reviewing Vetshare s business activities in light of its present and projected cash deficiencies. The aim of this complete review has been to eliminate the $80,000 to $100,000 monthly loss from operations and thus achieve the previously stated goal of break even by the final quarter of the financial year. These changes include: Directors foregoing fees until the company has become consistently profitable on a month to month basis - Done Reduction in staff numbers, predominantly from the warehouse - Done Improvements in the way orders are managed and delivered - Ongoing Review of all freight expenses and recoveries - Ongoing Cessation of supply to some commercial customers where margins were low - Done Page 11 of 32

12 The Board considers that these changes have put the company on track to sustainable break-even. The VetShare Board considers that achievement of break-even will be a significant milestone in the company s development, especially given that it would occur within 2 years of the company s commencement of operations. c. Supply and Distribution As part of VetShare s growth planning, VetShare is considering the best means of securing supply and distribution channels including review of its current warehousing strategy. Presently, VetShare has a single warehouse in Smithfield in the western suburbs of Sydney. In the future it is likely that warehouses will need to be established in other capital cities, initially on the east coast, to service our growing customer base. VetShare may consider strategic solutions to ensure that its warehousing and distribution practices meet the requirements of its customer base while at the same time utilising its capital most efficiently. d. Strategic acquisitions VetShare will consider strategic acquisitions within the veterinary wholesaling industry as opportunities arise, and we are developing strategic alliances with other service providers to the veterinary industry. Acquisitions, if opportunities did arise, would almost certainly require funding via a further capital raising. e. Corporate Actions VetShare has been approached by a number of companies which have recognised the value of what VetShare has created. These companies have expressed an interest in investing a significant stake in VetShare s business and/or exploring other potential synergies. One such early approach by Cenvet, one of VetShare s major competitors, has been made public and has been the subject of much industry speculation. There are currently other opportunities being discussed which represent potential for synergies rather than capital injection alone. As at the date of this Memorandum no agreement, understanding or arrangement (including any preliminary agreement, heads of agreement or terms sheet) has been entered into by the company with any of these interested parties. There is no guarantee that such discussions will progress. However, the directors of VetShare consider that if one of the transactions under discussion comes to fruition, it could positively enhance the long-term value of VetShare. The Board of VetShare have publicly stated that they will seriously consider all such approaches, and the VetShare Board may endorse a proposal which it considers is in the best interests of the shareholders of VetShare, having regard to their long-term interests in the company and the industry. Where acceptance of such a proposal would require the input and approval of shareholders, VetShare will call an Extraordinary General Meeting of shareholders to consider the issues associated with the proposal. Page 12 of 32

13 f. Shareholder-Customer Rewards At VetShare s Annual General Meeting held on 22 November 2013, VetShare shareholders voted to adopt an amended constitution for the company. Under its new constitution, VetShare may now issue bonus shares to its shareholders. The VetShare Board is considering implementation of a scheme by which its shareholders who are customers of VetShare are rewarded with bonus shares in the company, based on the value of their purchases from the company. Part 4 - About the Offer What is being Offered? Through this Information Memorandum, VetShare is offering its current shareholders the opportunity to increase their stake in VetShare by subscribing for fully paid ordinary shares in VetShare Limited for an issue price of $0.50 per share (the Offer ). The Offer is available to all VetShare shareholders who meet the definition of sophisticated investor or professional investor in the Corporations Act, or to whom VetShare could otherwise offer Shares under this Memorandum in accordance with the limitations of the Corporations Act. What is the Offer Price? The shares are offered at $0.50 per share. This is reflective of, VetShare s estimated Net Tangible Asset backing per share as at 31 December 2013, and represents a discount of 50% to the price paid for shares in VetShare s initial capital raising in March Investors should note that this value does not take into account the value of goodwill and other intangible asset value which has accrued in the company since its inception, including the value of the company s relationships with its customers and suppliers; its branding, logo and trademarks; and the value and experience of its human resources. As such, on the assumption that the company does become profitable over time with the help of the capital raised under this Memorandum, the directors consider the shares offered under this Memorandum to be priced fairly. In addition, shareholders who accept the offer of shares under this Memorandum will gain the benefit of lowering the average cost of their VetShare shares. Who can accept the Offer? The Offer is only available to current shareholders of VetShare: Page 13 of 32

14 (a) Who meet the description of sophisticated investor as set out in section 708(8) of the Corporations Act and who provide an Accountant s Certificate in the form set out in Attachment 1; or (b) Who meet the description of sophisticated investor as set out in section 708(10) of the Corporations Act and who provide a copy of a statement made by their licensed financial advisor asserting their experience in investing in securities ; or (c) Who meet the definition of professional investor as referred to in section 708(11) of the Corporations Act; or (d) To whom VetShare is otherwise able to offer and issue shares to without a disclosure document in accordance with the Corporations Act. While the Offer is only available to existing VetShare shareholders, a shareholder is welcome to nominate a related person such as their spouse, child, SMSF or controlled trust or company to apply for the shares. The purpose of limiting the Offer to existing shareholders is: (a) Subject to the limitations on offering shares under the Corporations Act, to allow existing shareholders to potentially limit their ownership of the company from being diluted through a new issue of shares; and (b) To recognise current shareholders ongoing loyalty to and support of the company in offering shares at a substantial reduction to the issue price of shares under the initial public offering in March Investors should also be aware that there is a maximum shareholding limit established in VetShare s constitution which means that no person (in conjunction with their related parties) may own more than 15% of the shares on issue in VetShare. Accordingly, any purported acceptance of the Offer which would result in any person exceeding this limit would be reduced such that the limit was not breached. VetShare directors retain the discretion to accept or reject any application for shares in whole or in part. If they reject an application, they are not obliged to provide reasons for doing so. Furthermore, if the minimum threshold of 1,000,000 shares is not applied for by existing shareholders under this Memorandum then the Board will consider offering shares to parties who are not currently shareholders to allow recapitalisation in the best interests of the company. New shareholders would also be required to pay an issue price of $0.50 per share. Is there a minimum investment amount? The minimum investment amount is $500 for a subscription of 1,000 shares. Is there a minimum investment period? Under VetShare s constitution as amended on 22 November 2013, there is no requisite minimum holding period for shares issued after 2 April When is the Offer Available? Page 14 of 32

15 The Offer opens on Tuesday 4 March The Offer closes at 5.00pm on Friday 28 March The period from opening of the Offer until the Close date is referred to as the Offer Period. VetShare retains the discretion to extend the Offer Period, close the Offer Period early or accept applications for shares made outside of the Offer Period. If VetShare elects to close the Offer Period early, it will notify investors to whom an Information Memorandum has been provided and who have not yet accepted the Offer. How do I accept the Offer? To accept the Offer, investors must: a complete the Application Form attached to this Memorandum b c provide the subscription amount in cleared funds by the Close date. The subscription amount may be paid by cheque made out to VetShare Limited Share Offer Account or paid to the following account: BSB Account VetShare will hold the monies in this account in trust until such time as the shares are issued. provide such additional documentation as set out in this Memorandum or as reasonably required by VetShare to demonstrate that the investor is a sophisticated or professional investor (within the meaning of section 708 of the Corporations Act) or is otherwise able to accept the Offer without a disclosure document. d. Send the Application Form and other requirements set out above so as to be received by VetShare by the Closing time of 5.00pm on Friday, 28 March Applications should be sent to VetShare at: VetShare Share Offer 98 Long Street Smithfield NSW 2164 How much is being raised through the Offer? VetShare is placing a minimum limitation on the capital raising of 1,000,000 shares, ie $500,000, being an increase of 20.5% on VetShare s current shareholder base. If the minimum subscription amount is not raised under this Offer or from an offer to other non-shareholders, the Board will need to closely review the company s future. While no maximum has been placed on the amount to be raised under this Memorandum, if applications for Shares exceed 2,000,000 shares (being an increase of 41% of the current shares on issue), VetShare Page 15 of 32

16 directors would consider the immediate and future uses for the additional capital and may elect to reject some applications in whole or in part and return the application monies in excess of $1,000,000. When would I receive my shares? Applications for shares which are received and accepted by the company prior to the Close time of 5.00pm on Friday 28 March 2014 will be issued and allotted shares on or before 11 April Applicants should expect to receive notification by of the success or otherwise of their application on or before 11 April 2014, with certificates for new shares being distributed to shareholders by the end of April The Board of VetShare retains the right to accept any application for shares in whole or in part, and to reject any application for shares under this Offer. The Board may reject an application for any reason, but is more likely to do so where the applicant is not a vet or does not have a demonstrable interest in the veterinary industry. Refunds of application monies for unsuccessful applicants will be made by the end of April What types of returns and other benefits should I expect? An investment in VetShare should be considered a long-term investment, of at least 5 years. VetShare is a company which is in the very early stages of its development. As such, it is not anticipated that it will commence payment of dividends until after the end of the financial year at the very earliest. Over the long term, an investment in VetShare is expected to generate returns through capital growth and dividend income. Investors should note that no person guarantees any particular return from holding VetShare shares and you may not get back any or all of the money you invest. Because VetShare is substantially owned and operated by and for vets, veterinary shareholders should expect additional benefits from their shareholding through: o o o o The knowledge that accessing their veterinary supplies through VetShare helps them to build the value in their own company Possible discounts offered to veterinary shareholders Access to the bonus share scheme which may be made available to veterinary shareholders, by which they would become entitled to bonus shares depending on the value of the products they order through VetShare Access to VetShare s range of strategic partners who may offer VetShare shareholders beneficial pricing or service delivery on a range of services required by vets How would I exit my investment? As noted above, an investment in VetShare should be considered a long term investment which offers a range of benefits beyond potential capital appreciation and dividend payments. VetShare is not listed and there is no trading exchange for VetShare shares. Page 16 of 32

17 Where a Member wishes to dispose of their shares, they must notify the company, and the company would then make those shares generally available for sale to the existing shareholder base. If the existing shareholders do not wish to acquire the sale shares, the company may itself buy back the shares (in accordance with its constitution but subject to the buy-back requirements of the Corporations Act) or the selling shareholder may sell their shares to a third party. The other means by which a VetShare shareholder may divest of their shares are: The Board of VetShare may seek to list the company once it has developed to an enterprise size and nature suitable for listing; The Board of VetShare may seek to sell all of part of VetShare s business to a third party in which event VetShare may make a distribution of capital or otherwise seek to buy-back shares; A third party may seek to takeover VetShare, in which event the third party would buy the VetShare shares for consideration. Who are the current shareholders of VetShare? VetShare has an issued share base of 4,880,000 ordinary shares held among over 200 shareholders. As noted elsewhere in this Memorandum, shares are predominantly held by vets and entities associated with vets. All other shareholders are involved in the veterinary industry, for example as suppliers to vets. Shareholdings are broadly based, with the two largest shareholders, being entities respectively associated with VetShare s chairman and managing director, each owning just over 8% of the issued shares. The next largest shareholder owns 3% of the issued shares. If VetShare issues 1,000,000 shares under the Offer, it will issue an additional 20.5% of its current shareholder base. If it issues 2,000,000 shares, it will issue an additional 41% of its current shareholder base. Page 17 of 32

18 Part 5 - VetShare s Directors and Management Team Dr Mark Ethell BVSc MVetClinStud MACVSc FACBS Diplomate ACVS Chairman of the Board Mark is a veterinarian, specialist equine surgeon and owner of small animal and equine practices in the ACT. He was a co-founder and the inaugural President of the Australian Veterinary Business Association and still serves on the Board. Mark has also served as President of the AVA (ACT Div), AVA Policy Councillor, and on the Committee of the Australian Veterinary Practice Management Association. Mark is a graduate of Sydney University with Bachelor and Masters degrees and has worked and trained in the USA and New Zealand for several years before settling in Canberra 12 years ago. Mark is cofounder of VetShare Ltd. Mr Paul Rennie Managing Director Paul Rennie has been involved in the veterinary industry for over 32 years. With previous roles in Cenvet Australia Pty Ltd including General Management, Sales and Marketing management, and Customer Service and Logistics management, Paul has an in-depth knowledge of the veterinary industry and is widely credited for personalising the wholesale customer/supplier relationship. Since leaving Cenvet Australia Pty Ltd, Paul has completed a major Market survey for Pfizer Animal Health (Zoetis) and is a co-founder of VetShare Ltd. Dr Lindsay Hay BVSc MVS MACVSc AIMM Director Lindsay graduated with his Bachelor of Veterinary Science degree from the University of Sydney in 1974 and was employed as a veterinary associate at St George Animal Hospital in Sydney. In 1985 he joined Ian Eade in partnership at the Baulkham Hills Veterinary Hospital and has been the sole owner there since Lindsay gained membership of the Australian College of Veterinary Scientists (1980) in canine surgery, an MVS from Murdoch University (1996) and completed a Graduate Certificate in Management (Veterinary Practice) at the University of Western Sydney in Lindsay was a member of the national Australian Veterinary Association ) and served as President and committee member of the Australian Veterinary Practice Management Association ). He is a founding Board Member of the Australian Veterinary Business Association (2008 present). Page 18 of 32

19 Avinash Ramcharan Director Avi holds a number of senior management positions in a large multinational pharmaceutical manufacturer and has moved to Australia as Regional Vice President for the company s Oceanic activities in early Avi has a Diploma in Marketing and Certificate in Business Administration from Damelin Business School in Johannesburg. He also holds a Pharmacy Assistant Diploma as well as Product Management Diploma with the Smart Group based in South Africa. Avi is a highly motivated senior executive who has extensive business leadership and senior management experience across all aspects of his businesses from strategic business planning, sales and marketing, product and business development, human resources and financial accountability. He has managed regional businesses across continents, including responsibilities from a start-up to an expanding international business portfolio. Cath Colton Business Manager Cath Colton is the Business Manager for VetShare. Cath has worked in different management roles in the veterinary industry for over 14 years, as Manager of Cenvet Business Services, UNE Partnerships and also Practice Manager for New England Veterinary Centres. Cath manages the Sales and Customer Service Teams, Admin Teams, Human Resources, Events & Marketing and also ensures all Shareholders and VetShare clients are very well looked after. Cath also manages the electronic interfaces with OPEN VPMS, Rx Works and VetLink as well as VetShare s VetOrder and conducts training for OPEN VPMS and Rx Works. Sarah Zanon BComm LLB Grad Dip Applied Finance Company Secretary Sarah joined VetShare as company secretary in July She has over 20 years experience in legal and management positions both in Australia and internationally, and has extensive experience in corporate governance, transactional management, corporate law and capital raising. She has worked in general counsel roles in several Australian financial services and fund management entities, and has acted as company secretary for multiple entities, both listed and unlisted. Sarah is now the Principal of corporate legal practice CapitalLegal, which she started in May Sarah holds a Bachelor of Commerce (Accounting Major) and a Bachelor of Laws from the University of NSW, and Graduate Diplomas in Applied Finance and Legal Practice. She is a member of the Law Society of NSW, a Fellow of FINSIA and is admitted as a Solicitor of the Supreme Court of NSW. Page 19 of 32

20 Part 6 - Financial Performance Below is a summary of VetShare s more recent financial results and position. VetShare Limited Unaudited Profit and Loss Statement For Period Ending 31 December 2013 YTD Actual Sales 8,905, Less Cost of Goods Sold 8,122, Gross Margin 783, Less Operating Expenses Admin Expenses 490, Salaries and Benefits 769, Sales and Marketing 67, Total Operating Exp 1,327, Add/Less Other Income/Exp 17, Net Profit/(Loss) - 526, Audited P&L FY 13-1,178, Page 20 of 32

21 VetShare Limited Unaudited Balance Sheet As at 31 December 2013 Current Assets 4,498, Non-Current Assets 447, $ TOTAL ASSETS 4,946, Current Liabilities 2,651, Non-Current Liabilities 220, Total Liabilities 2,872, Total Equity (4,880,000 Ordinary Shares) 2,074, TOTAL LIABILITIES AND EQUITY 4,946, Page 21 of 32

22 Part 7 - Risks of Investment There are numerous inherent risks when making any investment decision. More specifically, the future of VetShare and consequently its share value is susceptible to a range of internal and external risks. These include but are not limited to the following risks: Forward Looking Statements Some of the statements contained in this Memorandum relate to future actions and events, commonly described as forward looking statements. These statements are based on known facts, risks, actions, circumstances and events but carry the inherent uncertainty that they may not occur or not occur in the way anticipated in this Memorandum. VetShare does not warrant or guarantee that those actions, events or circumstances will occur or occur in the way anticipated in this Information Memorandum. Operating Risks There are numerous operating risks for VetShare. Principally these revolve around the supply of stock to VetShare and the subsequent distribution to customers, and include risks associated with the information technology and logistics systems which VetShare has in place. There is a risk that supply channels to VetShare may be interrupted or delayed and that through the outsourcing of couriers, delivery to customers could be delayed. If they eventuated, these risks could result in customer dissatisfaction and loss of business. In mitigation of these risks, VetShare has implemented appropriate back-ups, business interruption procedures and disaster recovery plans. New Business VetShare commenced trading in September 2012 and should therefore be considered a business in its infancy. Like all new businesses, VetShare carries risks associated with establishing a customer base, supply chains, distributions networks, revenue stream, labour supply and other tasks and requirements associated with operating a start-up business. Global Economic Environment Like any business, VetShare will not be immune to a downturn in the global economic environment. While VetShare s key market and customers are not overly exposed to external economic risks, reductions in income, higher unemployment or reduced demand for primary products could result in decreased expenditure on animals and animal related products which could have negative effects on VetShare. In addition, changes in the global economic environment can result in changes to interest rates and exchange rates, which can have flow on effects for the cost of VetShare s supplies and the viability of its customer base. Page 22 of 32

23 Reliance on key personnel VetShare has built its business around relationships both with customers and suppliers. The Managing Director has significant connections in the industry, and as such Paul Rennie remains central to the establishment and maintenance of many customer and supplier relationships. Therefore, there may be an adverse impact on VetShare if the company is not able to retain him or recruit suitably qualified people to replace him. In mitigation of this risk, since it commenced operations, VetShare has appointed several highly qualified individuals who are also experienced in the veterinary industry. These personnel are important to the continued growth of the business. VetShare has established but not yet implemented an employee share scheme as an incentive to retain key personnel. The implementation of the scheme is likely to be postponed until after the company reaches break-even. Changes in the law VetShare may be detrimentally affected by changes in the law. These may include changes to licensing, taxation, importation, animal rights, drug regulation and any other laws relevant to VetShare as a company and a veterinary wholesaler. Competition Provet Pty Ltd, Lyppard Australia Limited and Cenvet Group Holdings Ltd are currently the major operators in the Australian veterinary wholesale market and control a significant portion of the market. They are established companies with strong links with suppliers and manufacturers. There is the risk of losing business to competitors where prices and service are not competitive. There is also the risk the major competitors could loss lead or offer incentives in attempts to draw potential customers away from VetShare and push VetShare out of the market. VetShare believes that it has established a competitive pricing structure and market presence offering an alternative service to compete in the market. Payment of Dividends It is not anticipated that the Directors will declare a dividend in the short term. Because wholesaling is a capital-intensive business, in order to achieve growth in the early years of operating the business, any profits are likely to be reinvested into the business. While the Directors make no forecasts relating to future profits or dividends, the Directors expect that in the longer term, dividends will be paid to shareholders. Capital Requirements Establishment of any new business is capital intensive, and the particular business of VetShare is capital intensive in comparison to other businesses. VetShare s success is dependent upon the company being able to raise sufficient capital to fund its operations, especially in the early stages of the business before it reaches break even. To date VetShare has achieved this through a combination of equity and debt capital, including the equity capital to be raised through this Memorandum. If insufficient capital is raised Page 23 of 32

24 through this Memorandum and from subsequent offers to non-shareholders, then the VetShare board will give further consideration to the company s future in the best interests of shareholders. In relation to debt capital, VetShare has a $400,000 finance facility with a company specialising in supply chain financing. For this facility to be utilised by VetShare, VetShare s major suppliers must accept payment through the facility. As with any revolving financing facility, there is also a risk that this facility may be withdrawn and a replacement facility cannot be obtained. VetShare mitigates this risk by ensuring that it keeps drawings under the facility to a manageable level and makes its facility payments on time. Currently VetShare has drawn down approximately $320,000 from this facility. Further, one of the Directors, Paul Rennie, has provided a $100,000 finance facility and this will be withdrawn and the money used to purchase shares under this Information Memorandum. In the future, the company will consider strategic acquisitions as and when they become available. In order to carry out any such acquisition, the company is likely to need to raise further capital, again in the form of equity and/or debt. Any additional equity raised will dilute existing shareholders percentage holdings in the company, while raising debt increases the company s risk profile. Even if such a raising is successful, there is no assurance that a proposed acquisition will achieve the anticipated outcomes for the company. The minimum subscription requirement under this Information Memorandum is $500,000. If the amount subscribed falls below the amount required by the company to meet its objectives, and the company proceeds to allot shares to applicants, there is a risk that VetShare may not be able to achieve some or all of its stated aims in the short term, or at all. Liquidity, Marketability and Transfer of Shares VetShare shares are not listed on any market and are not freely tradeable. While a listing may be contemplated in future, the Directors have no current intention to list VetShare shares. As such, investors must assume that an investment in VetShare shares will be for a long term, and they may not be able to dispose of their shares when they want to. VetShare calculates a Fair Value of its shares at least annually and this calculation is available to shareholders. This calculation can go down as well as up and may not be fully reflective of the full underlying value of the Company. This calculation does not represent an indication of the price at which shares can or should be traded and should be treated as information for VetShare shareholders to take into account in considering the value of their investment. VetShare shares may only be traded in accordance with the provisions of the Constitution. Restrictions on trading shares under the Constitution include a requirement that a Member who wishes to sell their shares must first offer those shares to other Members. If such shares are not acquired by other Page 24 of 32