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Silverwood Brands - Acquisition of stake in Lush and Sonotas

Announcement provided by

Silverwood Brands PLC · SLWD

12/12/2022 07:00

Silverwood Brands - Acquisition of stake in Lush and Sonotas
RNS Number : 2958J
Silverwood Brands PLC
12 December 2022


DATE: 12 December 2022 



Silverwood Brands plc

("Silverwood" or the "Company")

Acquisition of stake in Lush and

Acquisition of Sonotas Group Companies



Silverwood Brands plc, an enterprise company established to invest primarily in branded consumer businesses, is pleased to announce it has taken a significant step forward in its strategic plan through the acquisitions of interests in two consumer brands comprising Lush, a UK headquartered international cosmetics retailer, and Sonotas, a Japan-based skincare manufacturer. 


Silverwood has conditionally acquired approximately a 19.8% stake ("Lush Sale Shares") in each of Lush Cosmetics Limited ("LCL") and Lush Cosmetic Warriors ("LCW"), together ("Lush") from Executive Director, Andrew Gerrie and his wife Alison Hawksley together ("Lush Vendors"), and in addition, the Company has conditionally acquired 90% of the share capital of Sonotas Holdings Corporation and 100% of Sonotas Corporation from Executive Director, Andrew Tone and other sellers.


Lush Acquisition



Terms of Acquisition:


Silverwood has entered into a sale and purchase agreement ("Lush SPA") to acquire the Lush Sale Shares from the Lush Vendors. The total consideration for the acquisition of the Lush Sale Shares amounts to approximately £ 216,802,000 ("Lush Consideration Price") to be satisfied via the issue and allotment of 228,212,632 new ordinary shares ("Consideration Shares") to the Lush Vendors at the price of 95p per share, being the closing price of a Silverwood share the business day immediately before this announcement. The Lush Consideration Price was calculated based on the applicable minimum prices that the Lush Vendors may sell each Lush Sale Share in accordance and in compliance with the articles of association of LCL and CWL respectively.  Each of those articles of association state that the prescribed price at which each Lush Sale Share may be sold shall not be lower than "the median price of the prices as determined and certified in writing by two independent firms of chartered accountants as being in their opinion the fair value thereof between a willing buyer and willing seller valuing the Company on a going concern basis". Two independent valuations were carried out to determine the prescribed price pursuant to the articles of association of LCL and CWL respectively.


The Lush Vendors have agreed to a lock in and orderly market arrangement with the Company in relation to the Consideration Shares pursuant to which, save for limited circumstances, they will not dispose of dispose of any interest in the Consideration Shares for a period of 5 months from Admission and for a further period of 12 months thereafter, only dispose of the Consideration Shares through the Company's broker from time to time to ensure an orderly market.


Application has been made for the Consideration Shares to trade on the AQSE Growth Market ("Admission") which is expected to be on or around 15 December 2022, this being the final condition to be satisfied for completion of the Lush SPA.


In addition, pending the registration of Silverwood or its nominee as a shareholder of LCL and CWL, the Lush Vendors have granted to Silverwood full contractual powers to direct, and to give binding instructions to them in respect of, and to control, the exercise and/or non-exercise of any and all rights, powers and privileges attaching to the Lush Sale Shares including voting, participation and attendance at shareholder meetings.


The Lush Vendors have entered into a relationship agreement with Silverwood and VSA Capital, its AQSE Corporate Adviser, with effect from Admission, to regulate the relationship between them to ensure that the Company will at all times be capable of carrying on its business for the benefit of the Company's shareholders as a whole and all transactions and arrangements between the Company and the Lush Vendors will be at arm's length and on normal commercial terms.


Related Party Transaction


Due to Andrew Gerrie being an Executive Director of Silverwood, the Lush Acquisition is deemed to be a related party transaction in accordance with AQSE Access Rule 4.6 of the AQSE Rules for Companies. The Company's directors (excluding Andrew Gerrie, who is directly interested in the Lush transaction), having exercised reasonable care, skill and diligence, consider that the terms of Lush Acquisition are fair and reasonable insofar as the shareholders of the Company are concerned.



Background to Lush:


Lush is a manufacturer and seller of fresh handmade skincare goods and cosmetic products. LCL is the operating company responsible for the management of the business whilst CWL owns the rights to the Lush brand and controls the research and development of new products. 


Lush operates retail outlets in 48 countries and has manufacturing facilities in 6 nations. It produces a wide range of beauty and personal care products which include: creams, soaps, shampoos, shower gels, lotions, moisturisers, fragrances, scrubs, toothpaste tablets, masks and other cosmetics for the face, hair, and body using only vegetarian or vegan recipes.


According to published annual accounts of Lush filed at Companies House, in the year ended 30 June 2021, Lush's aggregated turnover (for both LCL and CWL) was £408 million, representing a 6.6% decrease on 2020. This was in large part due to the impact of Covid-19 and the subsequent lockdown restrictions. During the Coronavirus pandemic, Lush implemented a review and restructuring of its business which in 2021 led to a £32.4 million rise in EBITDA to £41.1 million and a profit before tax figure of £29.2 million, an increase of £74.4 million from 2020. 


In the year ended 30 June 2021, the net assets of the Company grew by approximately £29.7 million to £150.5 million compared to 30 June 2020. This was due to a substantial £33.3 million decrease in Lush's total liabilities which was only slightly offset by an approximately £3.5 million fall in its total assets.


In September 2021, Lush acquired its North American partner businesses for CAD$180 million (£143 million), plus CAD$20 million deferred consideration. This acquisition should add significantly to Lush's revenue in the coming years given the size of the opportunity of the US market. Going forward, Lush has stated its intent for immediate investment to grow the business


Andrew Gerrie was appointed a director of Lush in 1995 and worked alongside the co-founders to expand the business before leaving the management team in 2015.


Investment Rationale and Strategy:


Lush is a British success story and is now a well-established brand with a defined global footprint and the potential to meet strong growth targets in the future. The acquisition last year of its North American partner business has paved the way for a substantial increase in revenue and stronger cash flows over the short-term as well as the opportunity to expand its physical and online presence in the US and Canadian market.  The Directors of Silverwood ("Directors") believe the Lush Consideration Price is an attractive acquisition price which they expect could result in a significant upside for Silverwood shareholders.


The Directors believe that there will be substantial long-term gains that Silverwood stands to make by owning a stake in Lush and intends to hold its stake in Lush for the long-term. The Directors plan to engage positively with the Lush management, other shareholders and stakeholders to explore ways in which, together, they can maximise value for all parties. Silverwood's Directors have an extensive professional network and significant experience in the consumer brands space which should prove useful in generating new ideas to invigorate and strengthen the Lush brand.


The Directors believe that, as an AQSE quoted company, Silverwood will provide an opportunity for Lush customers to invest indirectly into Lush and reap the benefits of their continued support throughout the years. Silverwood and stakeholders will in future look to acquire additional shareholdings from other minorities and drive forward maximising value for all stakeholders.


Nevertheless, as a private group, Lush is only required to publish accounting information in accordance with the requirements of the Companies Act 2006. As a consequence, some financial information that is publicly available may become out of date and will not necessarily be in complete accordance with the current state of the business.  The Directors will take all steps which they consider reasonably necessary to ensure these risks are mitigated as much as reasonably possible.  Pending Admission of the New Ordinary Shares and registration of Silverwood as a shareholder, the Company will rely on the Lush Vendors to assist with its regulatory disclosure obligations in relation to the Lush Sale Shares. 



Sonotas Acquisition



Terms of Acquisition:


Silverwood has conditionally agreed to acquire ("Sonotas Acquisition") 90% of the total issued share capital of Sonotas Holdings Corporation  together with 100% of the total issued share capital of Sonotas Corporation from Andrew Tone, a Director of the Company and certain other sellers ("Sonotas vendors"). In addition, Silverwood has entered into a put and call option arrangement ("Put and Call Option") with Andrew Tone which entitles the Company to acquire (or for him to require the Company to acquire) from him the 10% balance of the total issued share capital of Sonotas Holdings ("Option Shares") during the 6 month period commencing 48 months from the date of completion ("Option Completion").   A summary of the consideration and the further terms of the Sonotas Acquisition is as follows:


On completion of the Sonotas Acquisition, Japanese ¥69,999,992 (approximately £417,000) in cash and Japanese ¥2,613,146,722 (approximately £15.6 million) in Silverwood shares will be paid to the Sonotas vendors by Silverwood ("Sonotas Consideration Shares"). The issue price of the Silverwood shares will be 95p per share, being the closing price of a Silverwood share on the business day immediately before this announcement.  The Company has also agreed to pay Andrew Tone a deferred payment in respect of his shares in Sonotas Holdings of ¥341,103,296 (approximately £2.0  million), on or before 1 July 2023.


Completion, which is expected to take place in early January 2023, is subject (amongst other things) to the achievement of certain minimum sales targets in December 2022 and for the cash balances of the Sonotas group as at 31 December 2022 to be above a stipulated amount. In addition, the Sonotas Acquisition is conditional on admission of the Consideration Shares to trading on the AQSE Growth Market. If Admission does not occur on or before 12 April 2023, the Company has the option to either extend the long stop date or terminate the Sonotas Acquisition.


Upon the exercise of the Put and Call Option, the purchase price for the Option Shares will be the sum of Japanese ¥275,749,989 (approximately £1.6 million), which will be settled through the issue to Andrew Tone of new Silverwood shares at the mid-market closing price on the business day before the exercise of the Put and Call Option ("Issue Price").


Certain earn-out payments ("Earn-out Payments"), which shall again be settled in Silverwood shares issued at the Issue Price, will become due to Andrew Tone and certain Sonotas vendors, subject to the Sonotas Group companies achieving demanding performance criteria, as follows:


-      10% profitability with the SteamCream brand and a minimum 10% compound annual growth rate in Japan over a 48 month period (the "First Earn-out Payment"); and

-      A 100% compound annual growth rate per year average over 48 months for sales outside of Japan (the "Second Earn-out Payment").

The maximum amount of the First Earn-out Payment will be equal to 100% of the revenue generated by the Sonotas companies in Japan in the final 12-month period of the 48-month performance period and the maximum amount of the Second Earn-out Payment will be equal to 300% of the revenue generated outside of Japan in the same period (subject to maximum payment of £9 million).


Lock-In Agreement


As part of the Sonotas Acquisition, Andrew Tone has agreed to enter into a lock-in and orderly market agreement with the Company and VSA Capital at the time of completion of the Sonotas Acquisition. Under the terms of the lock-in and orderly market agreement, save for certain specific exceptions, Mr Tone has agreed not to dispose of any interest he holds in the Silverwood shares issued to him upon completion of the Sonotas Acquisition for a period of 12 months from completion and then, for a further period of 12 months thereafter, not to dispose of such shares  unless it is through the Company's broker from time to time, with a view to maintaining an orderly market in the Company's Shares.



Related Party Transaction


Due to Andrew Tone being Executive Director of Silverwood, the Sonotas Acquisition is deemed to be a related party transaction pursuant to AQSE Access Rule 4.6 of the AQSE Rules for Companies. The Company's directors (excluding Andrew Tone, who is directly interested in the Sonotas Acquisition) consider, having exercised reasonable care, skill and diligence, that the terms of the Sonotas Acquisition are fair and reasonable insofar as the shareholders of the Company are concerned.


Background to Sonotas:


The Sonotas companies comprising Sonotas Corporation and Sonotas Holdings Corporation are headquartered in Japan and they manufacture, sell, import and export skincare products. They purchase raw materials in-house and outsources manufacturing through external factories. Sonotas owns two brands Steamcream and Cigarro. These brands are sold through wholesale sales at directly managed stores, official online stores, limited-time shops, limited-time shops at department stores and variety shops such as Takashimaya, Mitsukoshi, and Daimaru. The Sonotas directors include Andrew Tone (Managing director), and Shizuka Tagami.


Steamcream is a brand that manufactures skincare products using a steam emulsification process that works to provide additional protection and moisturise to skin. The Steamcream brand was launched in 2007 and produced only one product during its first 8 years in business. To date, the business has sold over 10 million units around the world and has evolved to eight product offerings which include moisturising cream, UV heat masks, face cleanse and lotion. Steamc     ream use only the best vegan, naturally derived ingredients and safe synthetics that restore & maintain healthy balance for your skin. The moisturisers are hand made in Japan using a Pure Steam Process, making it uniquely light and delicate.


Cigarro is a men's self-care brand that uses high quality products, natural ingredients and unique fragrances and formulas to provide consumers with easy-to-use solutions that appeal to their taste and character whilst simultaneously breaking down stigma attached to male cosmetics. Cigarro's range includes products for facial care, body care, fragrances, and towels.



Sonotas companies' sales for the financial year ending June 2021 fell to Japanese ¥1,116,958,000 (approximately £6.7 million), however, overall profit for the financial year increased by around 15% to Japanese ¥31,308,000 (approximately £190,000).


At the same time, Sonotas companies' total assets increased by Japanese ¥176,397,000 to Japanese ¥1,795,346,00 whilst net assets grew by Japanese ¥31,308,000 to Japanese ¥1,288,835,000.



Investment Rationale and Strategy:


The Directors believe that the Sonotas Acquisition represents an opportunity to acquire a unique and scalable product range which has considerable synergies with the Company's existing brands. Sonotas has enjoyed substantial commercial success in Japan and the Company believes this can be replicated in other markets around the world. The Cigarro brand particularly is focused on one of the most significant growth areas in cosmetics today; male grooming and beauty, and the Directors believe that it is strongly positioned to take advantage of this trend. 


The Sonotas Acquisition will further provide the Silverwood group of brands with an experienced team in Japan to manage the introduction of our brands to the Japanese market.



Effect on Share Capital and Total Voting Rights


As a result of the Lush Acquisition, the total number of voting rights in the Company as at the date of  Admission will increase to 242,029,694 shares ("Total Voting Rights").  No shares are held in treasury.


From the date of Admission, the Total Voting Rights figure may be used by shareholders as the denominator to determine if they are required to notify their interest in voting rights, or a change to that interest, in the Company under the FCA's Disclosure Guidance and Transparency Rules.


Directors Holdings and Concert Party Disclosure


Following completion of the Lush Acquisition the Directors will have the following holdings in the Company:



Directors' holdings

Number of shares

Post - Lush proportion of share capital

Andrew Gerrie*



Andrew Tone



Paul Hodgins



Tanith Dodge



Joel Palix



Sonia Hully



*Andrew Gerrie's shareholding comprises shares held in his own name and that of his wife, Alison Hawksley, as well as shares held by Silver Americum Limited, a company in which Andrew Gerrie holds a 20% stake and Alison Hawksley owns a 20% stake.


The Sonotas Acquisition is expected to complete in January 2023.  Following completion of the Lush Acquisition and the Sonotas Acquisition, together with fee payments made in shares, the concert party that was determined in consultation with the Takeover Panel following the Balmonds acquisition in June 2022 and the investment of Castelnau Group Limited ("Castelnau") in October 2022 will change.  The Concert Party will hold voting rights equivalent to 95.93% of Silverwood's total share capital:


Concert Party

Sonotas/Lush shareholding

Proportion of share capital

Alison Hawksley & Andrew Gerrie



Angus Thirlwell



Fushia Investments PTE LTD



Andrew Monk



Andrew Tone



Paul Hodgins



James Wilson



Hu Yu



Jane Raca



Andrew Raca






VSA Capital











Following the issue of the New Ordinary Shares in respect of the Lush and Sonotas transactions, increasing the Concert Party's shareholding in the Company to 95.93% of the Company's voting rights, for so long as the Concert Party hold more than 50% of the Company's voting share capital and its members are presumed to be acting in concert, they may increase their aggregate interests in the Ordinary Shares in the Company without incurring any obligation under Rule 9 to make a mandatory offer for the remaining shares, although individual members of the Concert Party, with the exception of Andrew Gerrie and Alison Hawksley, would not be able to increase their percentage interest in the Ordinary Shares of the Company through 30%, or between 30% and 50%, without the consent of the Panel.



Paul Hodgins, Non-Executive Director of Silverwood, said:

"I am delighted to announce the transactions relating to Lush and Sonotas. Both are tremendously exciting companies with a vast amount of growth potential. Silverwood is a rapidly growing business, with a team of highly experienced independent directors, and we are entrepreneurs ourselves. We have great respect for the strong values and track records of both these highly entrepreneurial companies. We look forward to engaging their management to provide support and to add value where we can, and in doing so also provide strong value to our own rapidly growing shareholder group."



For more information, please contact:


Silverwood Brands plc

Paul Hodgins


VSA Capital - AQSE Corporate Adviser and Broker

+44(0)20 3005 5000

Andrew Raca, Simba Khatai, Alexander Cabral (Corporate Finance)

Andrew Monk, David Scriven, Peter Mattsson (Corporate Broking)


Citigate Dewe Rogerson

Caroline Merrell, Noémie de Andia, Angharad Couch


+44(0)20 7638 9571


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