REG - Seed Innovations Ltd - Sale of South West Brands to OTO for £6.2 million

Seed InnovationsAnnouncement

20/04/2023 10:15

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RNS Number : 9138W  Seed Innovations Limited  20 April 2023

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 ('MAR').

 

Seed Innovations Ltd / AIM: SEED / Sector: Closed End Investments

 

20 April 2023

SEED Innovations Ltd ("SEED" or, the "Company")

 

Sale of South West Brands to OTO International for £6.2 million

 

SEED Innovations Ltd, the AIM quoted company focusing on making investments in
fast growing and industry leading businesses with a focus on the medical
cannabis, health and wellness space, is pleased to announce that its portfolio
company, South West Brands Limited ('SWB') has entered into a Sale &
Purchase Agreement ('SPA') for the sale of SWB to female founded OTO
International Limited ('OTO') for an enterprise value of £6,235,000 to be
paid in OTO shares (the 'Sale'). OTO is an omni-channel premium wellness brand
renowned for its use of holistic plant ingredients and CBD in its portfolio
products and since inception in 2018 has delivered year-on-year revenue growth
of 100% and is in a strong position to scale and reach profitability in the
near term, whilst continuing to build significant brand equity across multiple
territories.

 

SEED will receive a total of £423,000 in OTO ordinary shares following
conversion of the CLN's SEED holds in SWB and will be repaid cash of
£167,000, being repayment of the £150,000 8% Convertible Loan Note ('CLN')
plus accrued interest of £17,000, invested on 4 October 2021. Following a
total investment into SWB of £500,000 by SEED, the total return represented
by the Sale is £590,000, a blended return of 1.18 times the original
investment.

 

Following the completion of the Sale, SEED will hold 71,502 ordinary shares
representing 1.4% of OTO.

 

About OTO

OTO is a premium wellness brand renowned for its use of holistic plant
ingredients and CBD in its portfolio products.  Founded by Gemma Colao and
launched in the Harrods Beauty Hall in 2019, OTO's positioning as the premium
wellness brand of choice has enabled the business to build three diversified
and robust revenue streams (including retail, spa and e-commerce) across
multiple territories including the UK, USA, Japan and Europe. Desirable
premium and luxury partners include global 5* properties such as the Mandarin
Oriental, Soho House and Rosewood Hotels, online retailers including
Lookfantastic, and luxury retailers including Harrods, Liberty of London and
Selfridges to name a few.

 

OTO has raised £8.7 million to date, predominantly from early-stage venture
capital and high net worth individuals. Capital has been deployed to establish
a first-class in-house R&D and product innovation capability, and to build
design, sales and marketing capability.

 

OTO has delivered c.£4 million of sales to date with a gross margin of over
60% and year to date is showing year-on-year revenue growth of over 100%.

 

 

Ed McDermott, CEO of SEED, commented:

"I am pleased to be able to report the sale of South West Brands to OTO
International in what I consider to be a good outcome for both SWB and for
SEED. As we have spoken about on several occasions in recent months, it has
been a very hard market for both small cap companies in general, and in
particular CBD and cannabis related companies, and for SWB to be acquired for
some £6.2 million is testament to the hard work and dedication shown by
Rebekah Hall and her team in such a testing environment.

 

"I welcome the diversification of risk inherent in being part of a broader
stable of brands, as well as the strong fund-raising history of OTO, which
bodes well for any future support as the enlarged OTO Group further develop
their brands and markets.  As a new investor in OTO, the board and I look
forward to reporting on future success and developments of both OTO and its
underlying brands as they develop and leverage their cross-category
expertise."

 

Rebekah Hall, Founder, South West Brands said: "The acquisition of SWB by OTO
provides huge acceleration in our mission to build a portfolio of global
female focused wellness brands that serve our customers at the cutting edge of
innovation. Women's health and wellbeing has long been underserved in the
consumer goods industry. In OTO, a fellow female founded and focused business,
we have found a shared vision, ethos and drive. The enlarged OTO Group will
undoubtedly be an exciting and dominant force in the wellness industry which I
look forward to being part ofI."

 

James Bagley, CEO at OTO Group said: "The consumer need for well-being and
self-care products is on the rise, with the global wellness market already
worth trillions, and still growing at c.5.5% CAGR. The market is at an
inflection point, as early players and sub-standard products make way for
leading brands and lifestyle propositions that are thoughtful, effective, and
set to drive explosive growth."

Having worked with, and for, so many exceptional people over the years - it's
the privilege of a lifetime to now be working for such extraordinary female
founders in Gemma and Rebekah, as well as the board and the whole team. I'm
proud of what we've achieved, and enthusiastic about what's next!"

 

Further Details

SWB has entered into an SPA for the sale of SWB to OTO International Limited
for an enterprise value of £6,235,000 to be paid in OTO shares.

 

To date, SEED has invested a total of £500,000 into SWB via four CLN's, as
previously announced, and summarised as follows:

 

 

1.    £250,000 into CLN1 - a two year, 6% CLN

2.    £50,000 into CLN2 - a 12-month, 8% CLN (later rolled into CLN4
as announced on 8 August 2022)

3.    £150,000 into CLN3 - 12-month, 8% CLN*.

4.    £50,000 into CLN4 - a three year, 8% CLN (£50,000 new money, plus
roll up of CLN2's £50,000)

 

* CLN3 came to maturity in October 2022 and was extended to January
2023 following which SEED requested repayment.  A repayment plan has been
agreed and will occur during 2023 (post-closing of the Sale)

 

SWB management have agreed the sale of SWB to OTO for a headline price of
£6,235,000 (excluding the £167,000 CLN repayable to SEED), payable in equity
to be issued by OTO based on a £23.5 million valuation (that valuation being
implied by the issue price of shares at OTO's most recent fundraising).  On
completion of the Sale, OTO will be valued at c.£30 million.

 

SEED will receive a total of £423,000 in OTO ordinary shares and will be
repaid cash of £167,000, being the £150,000 8% Convertible Loan Note ('CLN')
plus accrued interest of £17,000, invested on 4 October 2021. The £167,000
will be repaid during 2023 on a time frame yet to be agreed.

 

Following a total investment into SWB of £500,000 by SEED, the total return
represented by the Sale is £590,000, a blended return of 1.18 times the
original investment.

 

The balance of the investment of £350,000 plus accrued interest, a total of
c.£390,000 will convert to SWB equity as part of the sale process and will be
sold to OTO at a price of £423,000, an effective return of 1.2 times against
the original investment of £350,000, such proceeds to be settled by the issue
of OTO shares.  Following the completion of the Sale, SEED will hold 1.4% of
OTO.

 

In the last published financial statements for the 18-month period ended 30
September 2021 OTO reported a Loss of £2.5M.

 

 

- ENDS-

 

 

 

  For further information on the Company please
visit    www.seedinnovations.co (http://www.seedinnovations.co/)    or
contact:

 

 Ed McDermott /                       SEED Innovations Ltd        E:    info@seedinnovations.co

 Lance de Jersey
 James Biddle /                       Beaumont Cornish Limited,   T: +44 (0) 207 628 3396

 Roland Cornish                       Nomad

 Isabella Pierre /                    Shard Capital Partners LLP  T: +44 (0)20 7186 9927

 Damon Heath
 Catherine Leftley /Isabelle Morris/  St Brides Partners Ltd,     E: info@stbridespartners.co.uk

 Max Bennett                          Financial PR

 

 

Notes

SEED Innovations is an AIM quoted investment company focused primarily on
disruptive high growth life sciences and technology businesses particularly
within the medical cannabis arena. The Company's strategy is to identify
early-stage opportunities that have an upcoming investment catalyst and grow
its portfolio in terms of value whilst limiting the number of investee
companies to a level where relevant time can be devoted to each.

 

The OTO Group offering, on completion, consists of an exciting and uniquely
positioned portfolio of brands in fast growing consumer sectors, with products
perfectly positioned to take share across beauty, female wellness, personal
care and spa.

 

●     OTO - Aspirational wellness by lifestyle brand with premium
skincare and a innovative spa and hotels proposition (including iconic, global
5* properties such as Mandarin Oriental), luxury retail (Harrods, Liberty's,
Selfridges to name a few) and DTC (https://otocbd.com/) route to market,
featuring some of the most awarded wellness and beauty products of a start-up
over the last three years.

●     FEWE - The leading UK brand for female menstrual/perimenopausal
wellness; The product range targets fully inclusive cycle care and includes
supplements, intimate care and fragrance; 30-50 year-old 'masstige' market.

●     LoveMeMeMe - A TikTok creator-led skin and bodycare brand.
Relatable, gender-neutral, and unashamedly promoting self-love through acts of
self-care; Utilising active skincare ingredients to promote affordable, yet
effective skin and body-care routines; Viral brand, Gen-z focused <$25pp.

●     Botanic Lab - The first brand in Europe to create a CBD-infused
soft drink; Grocery,

 With Novel Food clearance, Botanic Lab is one of under 10 brands able to
sell CBD drinks in the UK and Europe.

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