11 December 2015
What has happened?
Shareholders received a Notice of Annual General Meeting (AGM) and Circular to Shareholders in relation to the proposed demerger of 80% of the shares EcoBiotics Limited (EcoBiotics) held in QBiotics Limited (QBiotics) (Demerger).
Copies of the Notice of Annual General Meeting and Circular to Shareholders can be obtained through the Investor Centre.
The shareholder vote held at the company’s AGM on 26 November 2015 to approve the Demerger of QBiotics from EcoBiotics was unanimous.
Consequently, on 10 December 2015 all shareholders who held shares in EcoBiotics on 19 November 2015 have been issued 0.501712 QBiotics shares for every EcoBiotics share held.
There has been no change to the number of EcoBiotics shares you own. However, instead of owning QBiotics shares through your existing shares in EcoBiotics, you now own shares directly in QBiotics.
Are there any further steps required to implement the Demerger?
No, there are no further steps required to implement the Demerger.
Why is EcoBiotics demerging from QBiotics?
EcoBiotics and QBiotics are distinctly dissimilar companies and require quite different expertise to deliver on their particular operational and strategic objectives. The Demerger will enable the companies to operate separately. For example, for EcoBiotics, implementation of the Demerger will remove the distraction of later stage development activities conducted by QBiotics and allow the EcoBiotics' executives to fully focus on that company’s core business of discovery and early stage development.
Post the Demerger, EcoBiotics and QBiotics will function as fully separate companies with clearly defined business models and profiles:
- EcoBiotics will focus on its business of discovery and early stage development of new bioactive compounds from nature; and
- QBiotics will focus on its human and veterinary pharmaceutical product development business; specifically in respect of the anti-cancer drug EBC-46 and the wound healing treatment WH-1.
Will EcoBiotics retain any interest in QBiotics?
Yes, EcoBiotics retained approximately 20% of the existing interest it held in QBiotics before the Demerger. EcoBiotics owns approximately 13.1% of the issued shares of QBiotics after the Demerger.
After the Demerger will I still hold my existing shares in EcoBiotics?
Yes, the number of EcoBiotics shares you hold remains the same. The number of shares you hold in EcoBiotics is not be affected by the Demerger.
How many QBiotics shares will I receive?
For every ordinary share you held in EcoBiotics on 19 November 2015 you will receive 0.501712 QBiotics shares. In determining the number of QBiotics Shares that EcoBiotics Shareholders received, fractional entitlements have been rounded up to the nearest whole number.
Do I have to pay for the shares in QBiotics?
No, you are not required to pay any consideration for the QBiotics Shares received by you.
EcoBiotics undertook an in-specie distribution of 80% of the QBiotics Shares held by EcoBiotics to EcoBiotics Shareholders. This in-specie distribution of QBiotics Shares to the Company's shareholders is effected partly by way of a capital reduction and partly by way of a demerger dividend.
When will I receive the shares in QBiotics?
The Demerger was implemented on 10 December 2015.
What are the tax implications of the demerger?
Shareholders should refer to the letter from BDO, which is Appendix A to the Circular to Shareholders regarding the taxation implications of the Demerger.
- BDO letter (PDF document)
EcoBiotics has sought from the Australian Taxation Office (ATO) a Class Ruling on behalf of EcoBiotics' Shareholders to confirm the taxation outcomes of the Demerger for them.
- Class Ruling 2015/100 (PDF document)
Does the Demerger affect the cost base of my EcoBiotics shares? What is my cost base for the QBiotics shares?
If you choose demerger tax relief available under Class Ruling 2015/100 in respect of your EcoBiotics shares, any capital gain that arises is disregarded and the cost base of your EcoBiotics shares will need to be allocated across both EcoBiotics Shares and QBiotics Shares having regard to the market values (or a reasonable approximation thereof) just after the Demerger of the EcoBiotics Shares and the QBiotics Shares.
The Board has considered what would be a reasonable approximation of the market values of EcoBiotics Shares and QBiotics Shares for the purposes of this calculation and concluded that $0.197 per share and $0.500 per share are reasonable estimates of EcoBiotics Shares and QBiotics Shares respectively immediately after the Demerger.
Set out below is a worked example using 100,000 EcoBiotics Shares and a cost base of $40,000:
You are able to make your own assessment of what is a reasonable approximation of the market values given your personal circumstances. The above information should only be used by you as a guide for obtaining your own independent taxation advice.
For further detail as to tax matters you should refer to the letter from BDO, which is Appendix A to the Circular to Shareholders regarding the taxation implications of the Demerger.
- BDO letter (PDF document)
What is the position of overseas EcoBiotics Shareholders?
The distribution of QBiotics Shares to EcoBiotics Shareholders will be subject to legal and regulatory requirements in their relevant jurisdictions. Generally, Shareholders with a registered address in Australia as at 19 November 2015 are entitled to receive the in-specie distribution of QBiotics shares.
As described in the Circular to Shareholders, the Board may decide that the potential compliance obligations of any particular jurisdiction may be unreasonable and rather than transfer to that EcoBiotics Shareholder organise the sale of those shares on behalf of that overseas EcoBiotics Shareholder as soon as practicable after the demerger.
Will I be able to sell my shares?
Your situation has not changed. EcoBiotics and QBiotics are unlisted public companies and are not traded on an open market.