Salt Lake-based Usana Health Sciences Inc. on Monday said it will sell its business to a new corporation owned by Usana's founder, Dr. Myron Wentz.
The new corporation, Gull Sub, will be wholly owned by Gull Holdings Ltd., which is completely owned by Wentz and holds about 49.5 percent of Usana common stock.
Gull Holdings will change its name to Innova Ventures Inc. and will transfer the Usana name to Gull Sub.
"This transaction is the result of much consideration," Wentz said in a prepared statement. "I believe this transaction is structured in a way that will create an opportunity for shareholders to participate in the creation of value in the public market.
"Personally, I am committed to preserving and growing the Usana business operations for the long term, so that our associates, customers and employees will not experience any disruption of their incomes or product supply."
Shareholders still need to approve the plan and likely will meet May 10 for a vote. Usana's board of directors appointed a special committee to evaluate and participate in the final approval and negotiation of the transaction.
The committee has determined that approval will need more than a simple majority.
Gull Sub will pay for the business by the surrender and redemption at a price of $1.60 per share of all shares of Usana common stock owned by Gull Holdings and the issuance of a promissory note of $5 million, plus the assumption of liabilities.
Innova will retain ownership of all real property, cash of $3 million and some personal property. Gull Sub will lease from Innova the land and building currently used by the business. Lease payments will be $1.32 million annually, and Gull Sub will have an exclusive option to buy the property during the first three years of the lease.
The promissory note will be payable over five years, bear interest at 14 percent per year and will be subordinated to senior debt not to exceed $8 million.
After closing on the deal, Gull Sub will change its name to Usana Health Sciences Inc. and will continue the business of developing and manufacturing nutritionals, personal-care and weight-management products, and marketing those products through the existing Usana network marketing system. Nearly all employees will become employees of Gull Sub following the closing.
Innova will continue to trade publicly and hold tangible assets with a net book value of roughly $1.70 per share with additional unrealized tangible asset values of approximately 24 cents per share, based on the underlying net value of the retained and acquired assets.
Those assets will include cash, a promissory note from the purchaser, and the current corporate facilities in Salt Lake City that will be leased to Gull Sub.
The transaction plan will be set out in detail in a proxy statement to be filed with the Securities and Exchange Commission.
The company has been unable to locate a strategic partner during the past 18 months despite undertaking an aggressive program to secure a partner with whom to merge or that it might acquire. The transaction, it said, may facilitate a merger with or acquisition of an operating business that could generate a higher return on investment than the current business or marketing methods of the company.
After the deal closes, Gilbert A. Fuller will be named chief executive officer and director and John B. McCandless IV will be named president and director. Robert Anciaux, Jerry G. McClain and Ronald S. Poelman will continue to serve as board members.
Usana stock was trading at $1.67 early Monday, unchanged from Friday's close. In the past year, the price has ranged from $1.15 to $2.50.