PuriCore : Sale of Endoscopy Business

(LSE: PURI), a global company focused on safe and effective protection against the spread of infectious pathogens, today announces that it has conditionally agreed to sell the entire issued share capital of PuriCore International Limited, the Company's UK Endoscopy business, to Medivators B.V. for $ 26.9million in cash.

·  Sale of the Company's UK Endoscopy business for $26.9 million (gross) payable in cash on Completion (subject to Adjustments).

·  Medivators B.V., a European-based subsidiary of Cantel Medical Corp. (NYSE: CMN), is a leading provider of infection prevention and control products and services in the healthcare market.

·  The Company has initiated a comprehensive strategic review of the business to determine the best use of proceeds, which are expected to be approximately $25.3 million. This includes enhanced investment in the Continuing Businesses, potential strategic acquisitions in complementary businesses, and/or a potential return to shareholders.

·  During the financial year ended 31 December 2013, PuriCore International Limited generated revenue of $23.3 million, with profit before tax of $2.1 million. 

·  Subject to Shareholder approval at the General Meeting to be held on 20 June 2014 and other conditions, it is currently anticipated that the sale will be completed on 30 June 2014.

·  Shareholder approval must be obtained from more than 50 per cent. of the votes cast. Irrevocable undertakings and a non-binding letter of intent in support of the transaction have been received in respect of an aggregate of 28,902,389 Ordinary Shares representing 57.65 per cent. of the Issued Ordinary Share Capital.

Michael Ashton, Executive Chairman, said:

" The Board sees the greatest prospects for future sustainable growth of the Company through targeted expansion of our businesses in the Supermarket Retail and the Health Sciences segments. There are a number of options under consideration which include further leveraging of our core proprietary hypochlorous technology and strategic acquisitions that complement our existing businesses in these segments. We are currently engaged in a comprehensive strategic review to evaluate these opportunities.

"Against this backdrop we are delighted to announce this proposed cash sale of the Endoscopy business that will provide us with the resources to accelerate our strategic plans. Whilst the UK-based Endoscopy business has successfully evolved to supply products and services to hospitals in the UK, the vast majority of these do not rely on our core intellectual property and, as such, lack synergies with those in our other segments.

"The Board would like to thank our UK team for their work and dedication to PuriCore over the years and we wish them and the business much future success."

A Class 1 Circular containing details of the transaction is expected to be posted to Shareholders shortly and will be available on the investor area ofwww.puricore.com. A General Meeting to approve the transaction will be held at the offices of CMS Cameron McKenna LLP, Mitre House, 160 Aldersgate Street, London EC1A 4DD at 10.00 a.m. on 20 June 2014.

Enquiries:

About PuriCore

PuriCore plc(LSE: PURI) is a global company focused on safe and effective protection against the spread of infectious pathogens without causing harm to human or animal health or to the environment. PuriCore's antimicrobial technology and complementary products are used in well-established core businesses and emerging sectors of two broad markets: Health Sciences and Food & Agriculture. In the Health Sciences market, PuriCore is the leading full provider of all products and services required for a safe, efficient, and compliant endoscope decontamination to protect patients and staff in UK hospitals. PuriCore's breakthrough wound care technology is used to treat chronic and acute wounds including diabetic ulcers and burns in humans, for atopic dermatitis as private-labelled dermatologic treatments for humans, and to manage wounds in all species of companion and farm animals in the animal health segment. In the Food & Agriculture market, PuriCore's portfolio is used by three of the top-five US supermarket retailers to provide savings in labour costs and improvements in inventory loss and to address cross contamination of pathogens on fresh produce and floral products. In addition, the Company is progressing its research and development programmes on the use of its technology as an agricultural fungicide. PuriCore is headquartered in Malvern, Pennsylvania, with operations in Stafford and Clevedon, UK. To receive additional information on PuriCore, visitwww.puricore.com.

Certain statements made in this announcement are forward-looking statements. These forward-looking statements are not historical facts but rather are based on the Company's current expectations, estimates, and projections about its industry; its beliefs; and assumptions.  Words such as 'anticipates,' 'expects,' 'intends,' 'plans,' 'believes,' 'seeks,' 'estimates,' and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors, some of which are beyond the Company's control, are difficult to predict, and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. The Company cautions shareholders and prospective shareholders not to place undue reliance on these forward-looking statements, which reflect the view of the Company only as of the date of this announcement. The forward-looking statements made in this announcement relate only to events as of the date on which the statements are made. The Company will not undertake any obligation to release publicly any revisions or updates to these forward-looking statements to reflect events, circumstances, or unanticipated events occurring after the date of this announcement except as required by law or by any appropriate regulatory authority.

Proposed disposal of PuriCore International Limited

1.       INTRODUCTION

The Board of PuriCore announces that the Company has today conditionally agreed to sell the entire issued share capital of its wholly-owned, indirect subsidiary, PuriCore International Limited ("PIL") to the Purchaser, Medivators, B.V., which is an indirect wholly-owned subsidiary of Cantel Medical Corp., for an aggregate consideration of $26,892,000 on a cash-free-debt-free basis, subject to Adjustments and payable in cash on Completion.

Cantel Medical Corp. (NYSE: CMN) is a leading provider of infection prevention and control products and services in the healthcare market. Cantel Medical Corp. has a market capitalisation of approximately $1.3 billion as at 30 May 2014 and net sales of $425 million for the year ended 31 July 2013, approximately 37.7 per cent. of which was derived from the endoscopy segment.

In view of its size, the Disposal constitutes a Class 1 transaction for the purposes of the Listing Rules. Completion of the Disposal is therefore conditional, inter alia , on approval by Shareholders.

Subject, inter alia , to Shareholders approving the Disposal at the General Meeting to be held on 20 June 2014, it is currently anticipated that the Disposal will be completed on 30 June 2014. If the Resolution is not passed, the Disposal will not proceed.

2.       Background to the Company

PuriCore is an international company focused on safe and effective protection against the spread of infectious pathogens without causing harm to human or animal life or to the environment. PuriCore's antimicrobial technology and complementary products are used in both established core businesses and the emerging markets within Health Sciences and Food & Agriculture.

In the Health Sciences segment, PuriCore's UK-based Endoscopy business is a full provider of products and services required for safe, efficient and compliant endoscope decontamination in NHS hospitals. In addition, this business sells a catalogue of surgical consumables and manufactures and sells a line of laboratory clean-air and other scientific equipment.

Also part of the Health Sciences segment, PuriCore's US-based Wound Care and Dermatology business provides products that are used worldwide to treat chronic and acute wounds, including diabetic ulcers and burns in humans, for atopic dermatitis as private-labelled Dermatology treatments for humans, and to manage wounds in all species of companion and farm animals in the Animal Health segment.

In the US-based Food & Agriculture segment, PuriCore offers two products to US supermarket retailers for use in their fresh produce departments to improve food safety, quality, extend shelf life, and decrease food wastage. Additionally, PuriCore's products protect against fungal growth and extend the saleable life of cut flowers throughout the distribution chain with an initial focus on supermarket floral departments.

3.       Background to and reasons for the Disposal

Following an approach by Cantel Medical Corp. for the PIL business early in 2014, the Board conducted a strategic review of the position of PIL within the Group. The Board considers PIL as non-core because its business is no longer focused on the Group's core intellectual property in hypochlorous acid. Also, the Board sees the greatest prospects for growth of the Group and maximising shareholder value in expansion of the Supermarket Retail business and the Health Sciences segment. Accordingly, after consideration of alternatives and future goals, the Board concluded that a disposal of PIL to the Purchaser was in the best interests of the Company and Shareholders as a whole.

4.       Information on PIL

PIL is a UK-based business that primarily targets the UK endoscope decontamination market. With the acquisition of Labcaire Systems Limited in 2009, and the surgical endoscopy products business of Monmouth Scientific Limited in 2012, the Directors believe PIL is one of the largest providers of endoscope decontamination equipment and services in the UK.

PIL offers a product portfolio for both NHS and private hospitals that have endoscopic decontamination needs. The portfolio includes automated endoscope reprocessors, disinfectant chemistry (one of which is PuriCore's core hypochlorous acid technology) and drying cabinets, as well as consumables and services, including maintenance, training and validations. Approximately 310 UK hospitals with endoscopy suites (approximately 270 NHS hospitals and approximately 40 private hospitals) use PIL equipment.

PIL also targets the laboratory market with its Scientific (clean-air) Control of Substances Hazardous to Health (COSHH) equipment in the UK and internationally.

The business has diversified beyond the core disinfection chemistry technology (hypochlorous acid), which was the platform of the initial business and is the cornerstone of the Group's other businesses. Today, PIL offers a variety of decontamination chemistries, services and capital equipment. Whilst the Directors feel strongly that the new RapidAER, to be launched in 2014, and Endoscope Drying and Storage Cabinets, launched in 2013, create a strong platform for growth, the growth rate is not expected to be at the same pace as the Continuing Businesses given the Directors will give investment priority to those Continuing Businesses, if the Disposal is not completed.

During the three financial years ended 31 December 2013, PIL's results were as follows:

As at 31 December 2013, PIL had gross assets of approximately $14 million.

5.       Use of proceeds

The Company has initiated a comprehensive strategic review of the business to determine the best use of proceeds of the Disposal to create shareholder value. This includes enhanced investment in the Continuing Group's existing businesses, potential strategic acquisitions in complementary businesses, and/or a potential return to shareholders.

The Company will prioritise expansion of its US Supermarket Retail business, particularly into the Hospitality and Foodservice (i.e., food preparation) sector. The Company will drive adoption of its bottled concentrate products, ProduceFresh and FloraFresh, through investment in the sales and marketing team and the accelerated installation of concentrate-diluting systems at customer locations. The Directors believe that together this should increase recurring revenue, build market share, and mitigate competitive pressures.

The Company continues to expand its Wound Care and Dermatology business internationally. Opportunities to broaden product portfolio and geographic reach particularly in hospital and healthcare facilities in both existing and new platforms are being developed. These require investment in research and development to broaden the technology's application, develop new products, and achieve appropriate multinational regulatory approvals.

6.       Principal terms of the Disposal Agreement

Under the terms of the Disposal Agreement, the Purchaser has agreed to acquire the entire issued share capital of PIL. The consideration for the Disposal will be $26,892,000 payable in cash at Completion.

The consideration of $26,892,000, payable directly to PuriCore, Inc. at Completion, is subject to adjustment to the extent that the net working capital of PIL at Completion falls short of an agreed target and PIL has net cash or net debt at Completion, as well as adjustments related to the timing of revenue recognition and cash collection.

Completion of the Disposal Agreement is conditional, inter alia , on the Company obtaining the consent of Shareholders to the Disposal at the General Meeting as well as approval by the NHS of England and Scotland to the change in control of PIL.

Under the terms of the Disposal Agreement, at Completion, PuriCore, Inc. will make available to the Purchaser, under a royalty-free licence, certain intellectual property and Sterilox chemistry, insofar as it relates, inter alia , to the field of endoscope disinfection and the field of dental unit water line decontamination.

The Disposal Agreement contains certain warranties from PuriCore, Inc. in favour of the Purchaser. The aggregate amount recoverable under the warranties is limited to $16,135,200.

Under the Disposal Agreement, the Company has agreed to guarantee the obligations of PuriCore, Inc.

7.       Financial effects of the Disposal

Pursuant to the Disposal, the Continuing Group will receive net proceeds of approximately $25.3 million. This represents gross proceeds of $26,892,000 less costs relating to the Disposal of approximately $1.6 million, including a management bonus (which is not payable to any Director).

The Disposal will result in PIL no longer contributing to the financial performance of the Continuing Group. On the basis of the audited income statement of PIL for the financial year ended 31 December 2013, the Disposal would have a negative impact on Group profitability in the short-term given the loss of the profit generated by PIL but a positive impact on the Continuing Group's cash flows in the short-term as a result of the Disposal proceeds.

As at 31 December 2013, PIL had unaudited net liabilities of $7.1 million (including intercompany liabilities of $12.8 million, which will be forgiven by the Group at Completion).

Had the Disposal taken place on 31 December 2013, the pro forma net assets of the Continuing Group would have increased by approximately $19.6 million.

8.       Current trading and prospects of the Group

The Company announced on 14 May 2014 the following unaudited Interim Management Statement.

"Revenue for the Group decreased 2.9 per cent. to $10.6 million (6.4 per cent. at constant currency) in the first quarter of 2014 (Q1 2013: $10.9 million), as higher recurring revenues were offset by delays in capital orders. Cash and cash equivalents were $3.9 million as at 31 March 2014 (as at 31 December 2013: $3.4 million).

Food & Agriculture

In the Supermarket Retail business, revenue increased 17.8 per cent. to $4.3 million (Q1 2013: $3.6 million) due to growth in the Company's newly launched concentrate product. During the period, this business completed all remaining Sterilox Fresh System installations for the $14.0 million agreement with a top-five US supermarket retailer announced in April last year as well as continued shipments of FloraFresh and ProduceFresh bottled concentrate products under the three major multi-year contracts with leading US retailers. For the full year, the Supermarket Retail business plans to invest in sales and marketing to drive growth in product usage of FloraFresh and ProduceFresh as well as expand the Floral business target market to florists and into the floral supply chain.

Health Sciences

During the first quarter of 2014, Endoscopy revenue decreased 6.0 per cent. (12.0 per cent. at constant currency) to $5.9 million (Q1 2013: $6.2 million). The decrease was due to delays in fulfilment of capital orders and planned heavier sales in the second half of the year in anticipation of the launch of the new state‑of‑the‑art endoscope washer disinfector, RapidAER®. During the quarter, the Endoscopy business completed final testing of and received CE marking for the new product. Market acceptance of RapidAER has been most favourable, and sales orders are already in hand to commence shipment in June.

Global Wound Care and Dermatology revenue decreased 55.8 per cent. to $0.5 million (Q1 2013: $1.1 million) primarily due to milestone payments of approximately $0.8 million received in the first quarter of 2013 compared with nil in 2014. In February 2014, PuriCore signed a marketing and distribution agreement with Ueno Corporation for Vashe in 15 Middle East and North African countries. Initial shipments commenced in the first quarter of 2014. In April 2014, PuriCore launched a complementary product for the Animal Health market, NovaZo Wound Hydrogel Dressing."

12.     Recommendation

The Board considers the Disposal to be in the best interests of Shareholders as a whole and accordingly recommends that Shareholders vote in favour of the Resolution to be proposed at the General Meeting.

13.     Voting

It is noted that, whilst Non-Executive Director Daniel Hegglin believes the sale of PIL is in the best interests of Shareholders as a whole, he also believes that the Disposal consideration undervalues the business. Hence, Mr. Hegglin has stated that he intends to vote against the Resolution in respect of his own beneficial holding amounting to 4,909,091 Ordinary Shares representing approximately 9.79 per cent. of the Issued Ordinary Share Capital.

All other Directors with beneficial interests in the Issued Ordinary Share Capital have irrevocably undertaken to vote in favour of the Resolution in respect of their own beneficial holdings, amounting to an aggregate of 136,426 Ordinary Shares representing approximately 0.27 per cent. of the Issued Ordinary Share Capital. Including the Directors, Shareholders, who in aggregate own 14,155,362 Ordinary Shares representing approximately 28.23 per cent. of the Issued Ordinary Share Capital, have irrevocably undertaken to vote in favour of the Resolution. The Company has also received a non-binding letter of intent to vote in favour of the Resolution in respect of 14,747,027 Ordinary Shares representing 29.41 per cent. of the Issued Ordinary Share Capital. Therefore, in aggregate, irrevocable undertakings and a non‑binding letter of intent have been received in respect of 28,902,389 Ordinary Shares representing 57.65 per cent. of the Issued Ordinary Share Capital.

DEFINITIONS

The following definitions apply throughout this Announcement unless the context requires otherwise: