CK Life Sciences Spends $1.3b (US$166 million) to Expand into US Nutraceutical Market

(February 6, 2006 – Hong Kong) CK Life Sciences Int’l., Inc. (“CK Life Sciences” or the “Group”) entered into an agreement to purchase a majority interest in Vitaquest International Holdings LLC (“Vitaquest”), a nutraceutical company based in the United States of America (“US”). Under the agreement, CK Life Sciences will acquire an 80% direct interest in Vitaquest at a purchase price of HK$1,291.5 million (US$166 million), subject to adjustment at closing. Completion is subject to approval at an Extraordinary General Meeting and fulfillment of the conditions precedent. The acquisition will be funded by internal resources and external borrowings.

Sales and Profits to be Significantly Enhanced
Vitaquest is the largest custom contract nutraceutical manufacturer and a leading manufacturer and marketer of branded nutritional products in the US. The Group is poised to benefit from the strong sales and profit contribution from Vitaquest. Based on Vitaquest’s unaudited management accounts, turnover reached HK$1.1 billion (US$142.8 million) for the year ended 31 December 2005, while normalized Earnings Before Interest, Tax, Depreciation and Amortization (“normalized EBITDA”) was HK$239.6 million (US$30.8 million).

Vitaquest has a good strategic fit for CK Life Sciences, offering synergies to the Group’s existing businesses. The acquisition will boost the Group’s product portfolio, enhance its product offerings and formulations, strengthen its R&D and manufacturing capabilities, and widen its sales and distribution network. The purchase of Vitaquest will enable the Group to speed up the development of its global business in a vast and rapidly growing nutraceutical market, which in the US alone was worth US$19 billion in 2004.

Powerful Springboard for Global Development
The acquisition represents a milestone achievement for the Group in realizing its defined growth strategies. Through the acquisition, it is expected that CK Life Sciences’ development will be highly accelerated by:
- significantly extending its operations to the US, the largest nutraceutical market in the world;
- firmly establishing its expansion in the nutraceutical sector; and
- substantially increasing its market share.

Commenting on the transaction, Mr H L Kam, President and Chief Executive Officer of CK Life sciences, said: "“We are very pleased about this major acquisition. Not only will Vitaquest bolster our operations in North America, it will form a powerful springboard for the Group and speed up our global development.”

2006 – A Leapfrog Year

“In 2005, CK Life Sciences recorded significant progress in the implementation of its acquisition strategy to expedite business expansion and growth. In the nutraceutical segment, Santé Naturelle (A.G.) Ltée (“A.G.”) was purchased in Canada, while Envirogreen Pty Limited and Nuturf Australia Pty Limited were acquired in Australia to strengthen the Group’s agriculture business.

He expressed: “The magnitude of the Vitaquest acquisition is far greater than the three purchases last year combined. The contribution to our financials is expected to be even more significant.”

Mr Kam said: “2006 will be a leapfrog year for CK Life Sciences.”

North American Operations Established
Following the acquisition of Vitaquest, as well as the purchase of A.G. last year, the Group has established its North American operations under the leadership of Mr Alan Yu, Vice President and Chief Operating Officer of CK Life Sciences, to spearhead expansion in this major nutraceutical market.

Acquisition Strategy to Continue
The Group has dedicated enormous efforts to exploring acquisition opportunities to drive growth over the last few years. The acquisition of Vitaquest reflects achievement of one of the initiatives undertaken in 2005. CK Life Sciences continues to consider investment opportunities around the globe, including North America, Europe, Australia and Asia. Several projects are at a relatively mature stage.

Vitaquest – Largest US Nutraceutical Custom Contract Manufacturer
Vitaquest is one of the leading manufacturers and marketers of branded nutritional products in the US, and the largest in custom contract manufacturing in the country. It is engaged in the business of supplying and manufacturing nutritional supplements worldwide. Vitaquest represents the only US-based nutraceutical company that can provide fully vertically integrated services to its customers. Garden State Nutritionals, one of the two main operating divisions of Vitaquest,formulates, develops and manufactures dietary supplements. Windmill, Vitaquest’s distributiarm, sells Vitaquest’s own branded as well as third party products to mass merchants, drug store chains, independent pharmacies, supermarkets and health food stores. At present, Vitaquest manufactures over 800 products, including liquids, creams and lotions, tablets, capsules, effervescents and powders, across all human conditions. The company operates out of GMcertified facilities.

The company was founded more than 20 years ago by the Frankel family, who will retain a 20% stake upon completion of the acquisition. Mr Keith Frankel, son of the founder and current Chief Executive Officer (“CEO”) of Vitaquest, will continue to serve the company as CEO.

Vitaquest possesses a diverse and loyal customer base that includes renowned brands such as MHP, Amerifit, Chattem, ConAgra, Perricone and Mannatech. The company serves over 400 customers in more than 35 countries. Vitaquest adopts a low risk approach in managing its customer portfolio. Its top 20 customers account for approximately 40% of sales and most of Vitaquest’s leading customers rely on the company to supply the majority of their product range.

Based on Vitaquest’s unaudited management accounts, turnover was recorded at HK$1.1billion (US$143 million) for the year ended 31 December 2005, and normalized EBITDA was HK$239.6 million (US$30.8 million). Unaudited net losses after tax for the same period were HK$40.5 million (US$5.2 million). The losses were attributable to a number of non-recurring items, such as transactional expenses related to the recapitalization in 2005, vendor’s personal/non-business related expenses, start-up costs and non-recurring compensation, which will discontinue after completion.


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