shutterstock_1670805733.jpg

Proposed Acquisition of ResApp Health by Pfizer Australia Holdings Pty Limited, a wholly-owned subsidiary of Pfizer Inc, for $0.146 cash per share by scheme of arrangement.

Your Vote is Important

Your Directors unanimously recommend that you vote in favour of the Scheme, in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ResApp Health Shareholders.

 

The Independent Expert has concluded that the Scheme is in your best interests, in the absence of a superior proposal.

Key Considerations

References to Sections and Schedules are to the named Sections and Schedules in the Scheme Booklet which can be accessed under the ‘Scheme Booklet’ page.

Reasons why you should vote in favour of the Scheme

The Scheme has been unanimously recommended by your Board of Directors as being in the best interests of ResApp Shareholders in the absence of a Superior Proposal

Your Directors unanimously recommend[1] that you vote in favour of the Scheme and each Director presently intends to vote in favour of the Scheme with respect to the ResApp Shares he holds or controls, in each case in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Scheme is in the best interests of ResApp Shareholders.

In reaching that conclusion, your Directors considered:

  • all of those matters explained in the Chairman's Letter and this Section 2; and

  • the initiatives undertaken, and avenues considered, to date, by the ResApp Board and senior management to drive shareholder value.

 

[1] In relation to the unanimous recommendation of the ResApp Directors refer to Section 4.5 for further details.

A$0.146 per Scheme Share represents a compelling premium to historical trading prices

Scheme Shareholders will receive A$0.146 per Scheme Share.

A$0.146 per Scheme Share represents:

  • a 62.2% premium to the closing price of ResApp Shares of A$0.09 on 8 April 2022;

  • a 63.0% premium to the one month VWAP up to 8 April 2022; and

  • a 77.4% premium to the three month VWAP up to 8 April 2022,

with 8 April 2022, being the last trading day prior to announcement of the proposed Scheme.

The Scheme Consideration represents an attractive premium as compared to the results of the Independent Expert’s review of control premiums on completed transactions, paid by acquirers of all ASX-listed companies with a mean of 34.90% and a median of 30.79%.

The Independent Expert, BDO, has concluded that the Scheme is fair and reasonable to ResApp Shareholders

The Independent Expert, BDO, has concluded that the Scheme is fair and reasonable and in the best interests of ResApp Shareholders.

The Independent Expert has assessed the value of ResApp Shares on a controlling interest basis to be A$0.146 – A$0.277 per ResApp Share. 

The Independent Expert states that the Scheme Consideration (being A$0.146 per Scheme Share) is within the Independent Expert's assessed valuation range for ResApp on a 100% controlling interest basis. Accordingly, the Independent Expert has concluded that the Scheme is fair and reasonable and in the best interests of ResApp Shareholders.

The Independent Expert's Report is set out in Schedule 2. Your Directors recommend that you read the Independent Expert's Report before completing your personalised Proxy Form.

No Superior Proposal has emerged 

As at the date of this Scheme Booklet, no Superior Proposal has emerged and the Directors are not aware of any Superior Proposal that is likely to emerge. Given the time elapsed since the Announcement Date ResApp Shareholders should consider whether a Superior Proposal is likely to arise in the circumstances.

 

If a Superior Proposal is received, this will be announced to ASX, and the ResApp Directors will carefully consider the proposal and advise ResApp Shareholders of their recommendation (subject to the exclusivity provisions of the Scheme Implementation Deed).

The Scheme provides certainty against the risks associated with the execution of ResApp's long term strategy

The Scheme provides certainty against the risks associated with the execution of ResApp's long term strategy, including: 

  • uncertainty as to whether product performance will meet the clinical and regulatory requirements for approval in ResApp’s target markets. The ResApp COVID Algorithm is still in development and will likely need to be proven through additional clinical trials, particularly given the Data Confirmation Study shows that the ResApp COVID Algorithm is less effective than reported in the March Results. To meet the approval requirements of regulatory agencies such as the FDA, ResApp’s COVID Algorithm may need to undergo a further pivotal study. There is no guarantee the ResApp COVID Algorithm will prove successful in further clinical trials or obtain the necessary regulatory approvals;

  •  the need for ResApp secure a suitable partner to significantly expand its commercial capabilities to successfully commercialise its products. The ResApp COVID Algorithm is still in development, with no guarantee it will prove successful. 

  • that, based on ResApp’s financial position, further capital is likely to be required to fully develop ResApp’s products. Any additional equity funding may be dilutive to ResApp Shareholders, may be undertaken at lower prices than the current market price and any debt funding may involve restrictive covenants which limit ResApp's operations and business strategy. No assurances can be given that appropriate capital or funding, if and when needed, will be available on terms favourable to ResApp or at all;

  • there is potential competition from third-party screening tests and diagnostic devices, which may adversely impact the future potential value of ResApp’s products and market opportunities;

  •  that, forecasting of the COVID-19 pandemic remains challenging, and moving forward there is no guarantee that the COVID-19 diagnostic market will remain at current levels. Therefore, the commercial opportunity for ResApp’s COVID Algorithm remains uncertain; and

  • the significant investment in marketing and education required by ResApp of a suitable partner to drive behaviour away from standard molecular testing toward smartphone based-testing.

Refer to Section 7 for further information on the risks associated with the execution of ResApp’s long term strategy if the Scheme is not implemented.

The Scheme has limited conditionality and not subject to onerous conditions

The Scheme is only subject to competition regulatory approval and other customary conditions for transactions of this nature (e.g. Court and ResApp Shareholder approval). 

The Scheme Consideration is all cash and provides certainty of value and timing to ResApp Shareholders

The Scheme Consideration consists of A$0.146 cash per ResApp Share . The all cash Scheme Consideration provides certainty and liquidity for ResApp Shareholders.

 

This certainty should be compared against the risks and uncertainties of remaining a ResApp Shareholder (if the Scheme is not approved) to which ResApp Shareholders are currently exposed. See Section 7 for more information on key risks if the Scheme is not implemented. 

ResApp’s share price may fall if the Scheme does not proceed

The trading price of a ResApp Share rose by 22% following the announcement of the Scheme on the Announcement Date (based on the closing price of ResApp Shares on ASX on the date prior to the Announcement Date and the Announcement Date). The trading price of a ResApp Share, as at the Last Practicable Date, is currently [insert]% higher than the closing price of ResApp Shares on ASX on the date prior to the Announcement Date. 

If the Scheme is not approved and no Superior Proposal emerges it is likely that the trading price of ResApp Shares will fall to below the level at which it has been trading since the Scheme was announced (although this is difficult to predict with any degree of certainty). Since 8 April 2022, being the last trading day prior to announcement of the Scheme, the All Ordinaries (XAO) index has fallen by [insert]% and the Small Ordinaries (XSO) has fallen by [insert]% as at the Last Practicable Date.

Over the twelve months prior to the announcement of the Scheme on 11 April 2022, ResApp Shares traded between a low of A$0.04 per ResApp Share and a high of A$0.09 per ResApp Share. On 8 April 2022, the last trading day prior to the announcement of the Scheme, ResApp shares closed at A$0.09 per ResApp Share.

The graph below shows the closing price of ResApp Shares during the twelve months ended 8 April 2022.

No transaction costs on the disposal of your Scheme Shares under the Scheme

The Scheme provides an opportunity for you to sell all of your ResApp Shares at once with no associated brokerage costs, which may otherwise be incurred if you seek to sell your ResApp Shares on-market.

There are risks to not voting for the Scheme

Refer to Section 7 for further risks if the Scheme is not implemented.

Reasons why you should vote against the Scheme

You may disagree with your Directors' unanimous recommendation or the Independent Expert's conclusion

You may disagree with the unanimous recommendation of your ResApp Directors and the conclusion of the Independent Expert, who has concluded that the Scheme is fair and reasonable and in the best interests of ResApp Shareholders, in the absence of a Superior Proposal. Refer to Schedule 2 for a copy of the Independent Expert's Report.

You may believe that the Scheme carries risks that you consider unacceptable

In considering the Scheme, you should be aware that there are a number of risk factors, both general and specific to the Scheme, which you may consider unacceptable. Please refer to the non-exhaustive outline of risk factors in Section 7 for more information.

A Superior Proposal for ResApp, if it were to continue as a stand-alone entity, may materialise in the future

You may believe that there is a possibility that a Superior Proposal could emerge in the foreseeable future. However, since the announcement of the execution of the Scheme Implementation Deed on 11 April 2022 and up to the date of this Scheme Booklet, no Superior Proposal has been received.

If a Superior Proposal emerges, this will be announced to ASX and the ResApp Directors will carefully reconsider the Scheme and advise ResApp Shareholders of their recommendation (subject to the exclusivity provisions of the Scheme Implementation Deed).

You may wish to maintain a direct investment in ResApp as an ASX listed company

You may wish to maintain your investment in ResApp in order to have an investment in a publicly listed company with the specific characteristics of ResApp in terms of industry, operational profile, size, and capital structure.

Implementation of the Scheme may result in a disadvantage to those who wish to maintain their investment profile. ResApp Shareholders who wish to maintain their investment profile may find it difficult to find an investment with a similar profile to that of ResApp and they may incur transaction costs in undertaking any new investment

If the Scheme proceeds, you will lose the possibility of receiving the benefit of any future, potentially more favourable, value for your Scheme Shares

If the Scheme proceeds you will cease to be a ResApp Shareholder and will lose the ability to participate in any potential upside that may result from maintaining your investment in ResApp.

 

You may consider that, despite the risks associated with the execution of ResApp’s long term strategy (including those set out in Section 7 of this Scheme Booklet), your ResApp Shares have greater value on a stand-alone basis over the longer term. 

However, as with all investments in securities, there is no guarantee as to ResApp's future performance if it remains an independent ASX listed entity.

The potential tax consequences of the Scheme may not suit your current financial position or tax circumstances

If the Scheme is implemented, you may incur tax on the transfer of your ResApp Shares.

The disposal of the ResApp Shares to Pfizer Australia in accordance with the Scheme will give rise to a CGT event. The time of the CGT event should be the date that the ResApp Shares are disposed of, which will occur on the Implementation Date. 

Please refer to Section 8 for a summary of the general Australian tax implications of the Scheme. All ResApp Shareholders are advised to seek independent professional advice about their particular circumstances including, for non-resident ResApp Shareholders, any foreign tax consequences.