Forbes Medi-Tech Agrees To Sell Sterol Manufacturing Interest
Vancouver, Canada - Forbes Medi-Tech Inc. announced it has agreed to sell its interest in Phyto-Source LP, the Company's 50-50 sterol manufacturing joint venture, for US$25 million to Chusei Oil Co. Ltd., the Japanese parent company of the Company's joint venture partner, Chusei (U.S.A.) Inc. Simultaneously, Phyto-Source and Forbes Medi-Tech signed a supply agreement which will assure Forbes Medi-Tech of a supply of Reducol(tm) and other wood sterols for a period of 5 years. Forbes has agreed to buy all of its sterol requirements exclusively from Phyto-Source for the first year.
As a result of the sale:
· Forbes has generated US$25 million in non-dilutive capital.
· Forbes is able to focus all of its marketing and sales efforts towards a value-added approach for the Company's ingredient business.
· Forbes has further enhanced its position as an innovative Life Science Company dedicated to the prevention and treatment of cardiovascular disease.
· Forbes' revenue guidance for 2006, scheduled to be released before the end of the 1st Quarter, will reflect this change in ownership and the subsequent discontinuance of non-proprietary sterol sales.
"We believe that owning an interest in a sterol manufacturing facility is no longer critical to Forbes' business strategy of developing and marketing a continuum of products for the prevention and treatment of cardiovascular disease, from food and dietary supplement ingredients to pharmaceutical therapeutics," said Charles Butt, President and Chief Executive Officer. "Forbes' product focus in the lifestyle end of that continuum is on building our own proprietary, value-added, branded, and clinically tested food and dietary supplement ingredients, of which our lead product is Reducol(tm)."
Forbes originally co-founded the Phyto-Source joint venture in 2001 out of necessity to create a supply source for Reducol(tm), and in doing so, jointly established the world's largest non-GMO wood sterol manufacturing facility for an initial cash contribution of US$8.1 million. Since then, alternative supply sources for sterols have developed.
Concurrently with the sale of its interest in Phyto-Source, Forbes will be repaid the remaining US$1 million of its original US$4 million loan, and all guarantees provided by Forbes USA to Phyto-Source's lenders for the joint venture's commercial term loan, line of credit and capital equipment lease will be discharged. Forbes has agreed not to compete with Phyto-Source in the manufacturing of wood sterols from tall oil soap, crude tall oil, tall oil pitch or any tall oil material containing phytosterols for 5 years. This agreement in no way prevents Forbes from marketing and supplying Reducol(tm) and other value added sterol products.
Closing of the sale is expected to occur on or about March 8, 2006.
The net proceeds of sale will be used for Forbes' pharmaceutical and nutraceutical development programs. As Forbes' joint venture interest was held in its U.S. subsidiary, U.S. taxes of approximately US$5.5 million are estimated to be payable on the sale proceeds.
SOURCE: Forbes Medi-Tech Inc.