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Afrox

Release Date: 18/06/1999 08:57:54      Code(s): PSM PSD1AFX
AFRICAN OXYGEN LIMITED
REGISTRATION NUMBER 05/00089/06
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
("AFROX")
PRESMED
PRESIDENT MEDICAL INVESTMENT LIMITED
REGISTRATION NUMBER 85/01313/06
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
("PRESMED")
MERGER OF CERTAIN OF THE HEALTHCARE INTERESTS OF AFROX ("AFROX HEALTHCARE")
WITH PRESMED THROUGH THE ACQUISITION BY PRESMED OF AFROX HEALTHCARE, RESULTING
IN A CHANGE OF CONTROL OF PRESMED;
CONDITIONAL OFFER TO PRESMED EQUITY HOLDERS;
CHANGE OF NAME AND FINANCIAL YEAR-END OF PRESMED; AND
FURTHER CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
FURTHER TO THE JOINT CAUTIONARY ANNOUNCEMENT PUBLISHED BY AFROX AND PRESMED ON
1 JUNE 1999, BOE MERCHANT BANK (A DIVISION OF BOE BANK LIMITED) ("BOE") AND THE
BUSINESS BANK ("TBB") ARE AUTHORISED TO ANNOUNCE THAT A MEMORANDUM OF
UNDERSTANDING HAS BEEN ENTERED INTO BETWEEN AFROX AND PRESMED WHICH, SUBJECT TO
THE FULFILMENT OF THE CONDITIONS PRECEDENT DETAILED IN PARAGRAPH 9, WILL GIVE
EFFECT TO THE MERGER ("THE MERGER") OF AFROX HEALTHCARE AND PRESMED AND RESULT
IN CONTROL OF PRESMED PASSING TO AFROX.
2. NATURE OF BUSINESS OF AFROX HEALTHCARE AND PRESMED
AFROX HEALTHCARE OPERATES 28 ACUTE CARE PRIVATE HOSPITALS AND "SAME DAY"
CLINICS WITH A TOTAL OF APPROXIMATELY 3 200 BEDS AND HAS A MINORITY INTEREST,
WITHOUT MANAGEMENT CONTROL, IN A FURTHER 4 PRIVATE HOSPITALS.
IN ADDITION TO THESE HOSPITALS AND CLINICS, AFROX HEALTHCARE PROVIDES CERTAIN
SPECIALISED HEALTHCARE SERVICES. AFROX OCCUPATIONAL HEALTHCARE IS CONTRACTED TO
PROVIDE FOR THE OCCUPATIONAL AND PRIMARY HEALTHCARE NEEDS OF SOME 85 000
EMPLOYEES OF 140 COMPANIES IN COMMERCE, INDUSTRY AND MINING, THROUGH A NETWORK
OF 125 CLIENT OWNED ON-SITE CLINICS AND HOSPITALS. DIRECT MEDICINES PROVIDES
SOPHISTICATED INFORMATION TECHNOLOGY SYSTEMS USED TO MANAGE AND FACILITATE THE
SUPPLY AND DISTRIBUTION OF CHRONIC MEDICATION TO APPROXIMATELY 125 000 MEDICAL
AID MEMBERS AND THEIR DEPENDANTS EVERY MONTH THROUGH CONTRACTED RETAIL
PHARMACIES. AFROX PHARMACY MANAGEMENT SERVICES PROVIDES LOGISTICAL SERVICES TO
HOSPITALS, INCLUDING INVENTORY MANAGEMENT AND MEDICAL PROCUREMENT. THESE
SERVICES ARE PROVIDED TO ALL GROUP HOSPITALS USING SOPHISTICATED SOFTWARE AND
ELECTRONIC INTEGRATION. HOSPITAL MEDICAL SYSTEMS PROVIDES SPECIALISED SOFTWARE
WHICH ELECTRONICALLY MANAGES THE STORAGE AND DISTRIBUTION OF MEDICAL
INFORMATION TO MEDICAL SPECIALISTS. AFROX COLLEGE OF NURSING AND TWO NURSING
SCHOOLS PROVIDE SPECIALISED TRAINING FOR THE DELIVERY OF HIGH QUALITY NURSING
SERVICES.
AFROX HEALTHCARE EMPLOYS APPROXIMATELY 5 700 PERSONNEL.
PRESMED OPERATES 32 ACUTE CARE PRIVATE HOSPITALS AND "SAME DAY" CLINICS WITH A
TOTAL OF 2 850 BEDS AND HAS MINORITY INTERESTS IN 7 PRIVATE HOSPITALS AND "SAME
DAY" CLINICS WITH 380 BEDS. PRESMED OFFERS A VARIETY OF TRAINING COURSES
THROUGH ITS SCHOOL OF NURSING.
PRESMED EMPLOYS APPROXIMATELY 3 600 PERSONNEL.
THE PRIVATE HOSPITALS AND DAY CLINICS OF AFROX HEALTHCARE AND PRESMED HAVE A
COMPLEMENTARY GEOGRAPHIC SPREAD ACROSS SOUTH AFRICA. THE UNAUDITED AGGREGATED
TURNOVER AND PROFIT BEFORE TAXATION FOR THEIR RESPECTIVE FINANCIAL YEARS ENDED
31 MARCH 1999, AND 28 FEBRUARY 1999, AMOUNTED TO APPROXIMATELY R1 570 MILLION
AND R200 MILLION RESPECTIVELY.
3. RATIONALE FOR THE MERGER
THE MERGER WILL POSITION PRESMED AS A MAJOR PARTICIPANT IN THE HEALTHCARE
INDUSTRY BENEFITTING FROM IMPROVED GEOGRAPHICAL REPRESENTATION AND ECONOMIES OF
SCALE. A PRIMARY BENEFIT WILL BE THE ABILITY TO PROVIDE QUALITY HEALTHCARE ON A
COST EFFECTIVE BASIS. SYNERGISTIC SAVINGS WILL BE DERIVED FROM INCREASED
EFFICIENCIES, THE IMPLEMENTATION OF BEST OPERATING PRACTICES AND THE
RATIONALISATION OF DUPLICATED SERVICES. THIS WILL BE ACHIEVED THROUGH THE
CENTRALISATION OF SERVICES SUCH AS FINANCE, THE OPTIMAL UTILISATION OF
INFRASTRUCTURE, ESPECIALLY IN THE AREAS OF MEDICAL PROCUREMENT AND INFORMATION
TECHNOLOGY, AND ENHANCED MANAGEMENT DEPTH AND SUCCESSION.
4. ACQUISITION BY AFROX OF AN INTEREST IN LIFECARE GROUP HOLDINGS LIMITED
("LIFECARE")
WITH EFFECT FROM 1 APRIL 1999, AFROX ACQUIRED A 55% INTEREST IN LIFECARE FROM
LIFECON INVESTMENTS LIMITED. REAL AFRICA HOLDINGS LIMITED ("REAL AFRICA"), AN
EMPOWERMENT HOLDING COMPANY, HOLDS THE REMAINING 45% OF LIFECARE. LIFECARE'S
MAIN BUSINESS IS THE PROVISION OF SPECIALISED HEALTHCARE SERVICES FOR CHRONIC
PATIENTS. IN ADDITION, LIFECARE HAS AN INTEREST OF APPROXIMATELY 40% OF THE
ISSUED ORDINARY SHARE CAPITAL OF PRESMED. AS A RESULT OF THIS INDIRECT INTEREST
IN PRESMED, AFROX IS A "RELATED PARTY" TO PRESMED FOR THE PURPOSE OF THE MERGER
AS DEFINED BY THE JOHANNESBURG STOCK EXCHANGE LISTINGS REQUIREMENTS.
ON THE MERGER BECOMING UNCONDITIONAL, THE LIFECARE SHAREHOLDING IN PRESMED IS
INTENDED TO BE DISTRIBUTED TO THE RESPECTIVE SHAREHOLDERS OF LIFECARE BEING
AFROX AND REAL AFRICA. PURSUANT TO THE MERGER AND THE DISTRIBUTION IN SPECIE
AFROX WILL HAVE AN INTEREST IN THE FULLY DILUTED SHARE CAPITAL OF PRESMED OF
APPROXIMATELY 76% AND REAL AFRICA WILL HAVE AN INTEREST OF APPROXIMATELY 5%.
AFROX HAS GRANTED CERTAIN CALL OPTIONS, IN FAVOUR OF REAL AFRICA, ON ITS SHARES
IN PRESMED SO AS TO AFFORD REAL AFRICA THE OPPORTUNITY TO INCREASE ITS
SHAREHOLDING IN PRESMED TO 17%. AFROX WILL ENDEAVOUR TO FACILITATE REAL AFRICA
INCREASING ITS SHARES FURTHER TO 20%.
LIFECARE WILL CONTINUE TO OPERATE AS A SEPARATE BUSINESS UNDER THE ONGOING
CHAIRMANSHIP OF DON NCUBE, CHAIRMAN OF REAL AFRICA.
5. MECHANICS FOR IMPLEMENTING THE MERGER
THE MERGER WILL BE ACHIEVED THROUGH THE ACQUISITION BY PRESMED OF AFROX
HEALTHCARE. THE PURCHASE CONSIDERATION WILL BE SETTLED THROUGH THE ISSUE OF
APPROXIMATELY 155 MILLION NEW ORDINARY SHARES IN THE SHARE CAPITAL OF PRESMED
AT 312 CENTS PER SHARE ("THE CONSIDERATION SHARES") REPRESENTING 70% OF THE
FULLY DILUTED SHARE CAPITAL OF PRESMED PURSUANT TO THE MERGER, PLUS A FURTHER
AMOUNT OF APPROXIMATELY R160 MILLION WHICH WILL REMAIN OWING BY PRESMED TO
AFROX ON LOAN ACCOUNT. THE EXACT LOAN AMOUNT WILL BE DETERMINED PURSUANT TO THE
COMPLETION OF RECIPROCAL "DUE DILIGENCE" REVIEWS. THE LOAN IS REPAYABLE WITHIN
THREE YEARS OF THE EFFECTIVE DATE AND BEARS INTEREST AT MARKET RELATED RATES.
THE MERGER WILL BE GIVEN EFFECT AS IF IT HAD TAKEN PLACE ON 1 APRIL 1999.
THE CONSIDERATION SHARES WILL RANK PARI PASSU WITH THE PRESMED ORDINARY SHARES
CURRENTLY IN ISSUE BUT WILL NOT BE ENTITLED TO PARTICIPATE IN A SPECIAL
DIVIDEND OF APPROXIMATELY R7 MILLION TO BE DECLARED BY PRESMED ON THE MERGER
BECOMING UNCONDITIONAL.
6. CHANGE OF CONTROL AND CONDITIONAL OFFER TO SHAREHOLDERS AND DEBENTURE
HOLDERS OF PRESMED
THE ISSUE OF THE CONSIDERATION SHARES IN TERMS OF THE MERGER WILL RESULT IN A
"REVERSE TAKE-OVER". PURSUANT TO THE MERGER AFROX WILL HOLD IN EXCESS OF 35% OF
PRESMED. IN TERMS OF THE PROVISIONS OF THE SECURITIES REGULATION CODE ON
TAKE-OVERS AND MERGERS ("THE CODE"), THE ISSUE OF THE CONSIDERATION SHARES WILL
ACCORDINGLY RESULT IN AN "AFFECTED TRANSACTION". CONSEQUENTLY, PURSUANT TO THE
MERGER BECOMING UNCONDITIONAL, AN OFFER WILL BE EXTENDED BY AFROX TO THE
SHAREHOLDERS OF PRESMED AT NOT LESS THAN 312 CENTS PER SHARE IN COMPLIANCE WITH
THE PROVISIONS OF THE CODE.. A COMPARABLE OFFER WILL BE EXTENDED BY AFROX TO
THE DEBENTURE HOLDERS OF PRESMED.
BOE HAS CONFIRMED TO THE SECURITIES REGULATION PANEL ("THE SRP") THAT AFROX HAS
SUFFICIENT RESOURCES AVAILABLE TO SATISFY FULL ACCEPTANCE OF THE OFFER.
7. FAIR AND REASONABLE OPINIONS
BOE AND TBB HAVE BEEN APPOINTED TO REVIEW THE TERMS OF THE MERGER AS THEY
RELATE TO AFROX AND PRESMED RESPECTIVELY AND WILL EXPRESS SEPARATE OPINIONS AS
TO WHETHER THE TERMS OF THE MERGER ARE "FAIR AND REASONABLE", WHICH OPINIONS
WILL BE INCLUDED IN THE CIRCULARS TO THE RESPECTIVE COMPANIES' EQUITY HOLDERS.
8. FINANCIAL EFFECTS
THE FINANCIAL EFFECTS OF THE MERGER WILL BE PUBLISHED IN A SUBSEQUENT
ANNOUNCEMENT ADVISING SHAREHOLDERS AND DEBENTURE HOLDERS OF THE FULFILMENT OF
CERTAIN OF THE CONDITIONS PRECEDENT AND AFTER THE SATISFACTORY COMPLETION OF
THE RELEVANT DUE DILIGENCE REVIEWS.
9. CONDITIONS PRECEDENT
THE MERGER IS CONDITIONAL UPON, INTER ALIA:
- THE APPROVAL OF PRESMED SHAREHOLDERS AND DEBENTURE HOLDERS IN SEPARATE
GENERAL MEETINGS OF THE RESOLUTIONS NECESSARY TO INCREASE THE AUTHORISED SHARE
CAPITAL OF PRESMED TO ENABLE THE CONSIDERATION SHARES TO BE ISSUED, APPROVING
THE ALLOTMENT AND ISSUE OF THE CONSIDERATION SHARES TO AFROX AND TO RATIFY THE
TERMS OF THE MERGER. AFROX HAS UNDERTAKEN NOT TO VOTE ON THE RESOLUTION
NECESSARY TO RATIFY THE TERMS OF THE MERGER;
- THE RATIFICATION OF THE TERMS OF THE DISPOSAL OF AFROX HEALTHCARE TO PRESMED
BY AFROX SHAREHOLDERS IN GENERAL MEETING;
- THE JSE GRANTING A LISTING OF THE CONSIDERATION SHARES;
- SUCH REGULATORY APPROVALS AS MAY BE NECESSARY INCLUDING THOSE OF THE SRP, THE
JSE, THE COMPETITION BOARD AND THE SOUTH AFRICAN RESERVE BANK - EXCHANGE
CONTROL DIVISION;
- THE CONCLUSION OF THE REQUISITE PURCHASE AND SALE AGREEMENTS TO THE
SATISFACTION OF THE BOARDS OF DIRECTORS OF BOTH AFROX AND PRESMED; AND
- ANY THIRD PARTY CONSENTS NECESSARY.
10. CHANGE OF NAME AND YEAR END
IT IS THE INTENTION TO CHANGE PRESMED'S NAME TO AFROX HEALTHCARE LIMITED.
THE FINANCIAL YEAR-END OF AFROX HEALTHCARE LIMITED IS TO BE CHANGED TO
30 SEPTEMBER TO COINCIDE WITH THAT OF ITS NEW CONTROLLING SHAREHOLDER.
ACCORDINGLY, AFROX HEALTHCARE LIMITED'S FIRST REPORTING PERIOD WILL COVER THE 7
MONTHS ENDING 30 SEPTEMBER 1999
11. DOCUMENTATION
CIRCULARS WHICH ARE SUBJECT TO THE APPROVAL OF THE JSE AND SRP ARE EXPECTED TO
BE DESPATCHED TO AFROX AND PRESMED SHAREHOLDERS AND THE HOLDERS OF THE PRESMED
CONVERTIBLE DEBENTURES WITHIN 28 DAYS OF THIS ANNOUNCEMENT.
THE CIRCULAR TO AFROX SHAREHOLDERS WILL CONTAIN FULL DETAILS OF THE DISPOSAL OF
AFROX HEALTHCARE TO PRESMED ("THE DISPOSAL") AND INCORPORATE A NOTICE OF THE
GENERAL MEETING FOR THE RATIFICATION OF THE TERMS OF DISPOSAL.
THE CIRCULAR TO PRESMED SHAREHOLDERS, A COPY OF WHICH WILL BE DESPATCHED TO
AFROX SHAREHOLDERS FOR INFORMATION PURPOSES, WILL INCORPORATE:
- FULL DETAILS OF THE MERGER AND THE TERMS THEREOF;
- LISTINGS PARTICULARS IN COMPLIANCE WITH THE PROVISIONS OF THE JSE LISTINGS
REQUIREMENTS;
- THE CONDITIONAL OFFER TO PRESMED SHAREHOLDERS AND DEBENTURE HOLDERS; AND
- NOTICES OF GENERAL MEETINGS FOR THE PURPOSES OF, INTER ALIA, INCREASING THE
AUTHORISED SHARE CAPITAL OF PRESMED, APPROVING THE ALLOTMENT AND ISSUE OF THE
CONSIDERATION SHARES TO AFROX AND RATIFYING THE TERMS OF THE MERGER.
12. TERMINATION
THE PROVISIONS OF THE MEMORANDUM OF UNDERSTANDING ENTERED INTO BETWEEN AFROX
AND PRESMED WILL LAPSE IN THE EVENT OF THE MERGER NOT BEING IMPLEMENTED BY 31
OCTOBER 1999.
13. FURTHER CAUTIONARY ANNOUNCEMENT
SHAREHOLDERS OF AFROX AND PRESMED ARE ADVISED TO CONTINUE TO EXERCISE CAUTION
WHEN DEALING IN THE EQUITY INSTRUMENTS OF THE RESPECTIVE COMPANIES UNTIL A
FURTHER ANNOUNCEMENT IS MADE REGARDING INTER ALIA, THE FINANCIAL EFFECTS OF THE
MERGER AND THE PROGRESS IN FULFILLING THE CONDITIONS PRECEDENT.
JOHANNESBURG
17 JUNE 1999
MERCHANT BANK TO AFROX
BOE MERCHANT BANK
MERCHANT BANK TO PRESMED
TBB
LEGAL ADVISOR TO AFROX
BOWMAN GILFILLAN
REPORTING ACCOUNTANTS AND
AUDITORS TO AFROX AND PRESMED
PRICEWATERHOUSECOOPERS
LEGAL ADVISOR
TO PRESMED
DYASON
SPONSORING BROKERS
TO AFROX
HSBC (JOHANNESBURG)
HSBC (NAMIBIA)
SPONSORING BROKERS
TO PRESMED
BOE SECURITIES
AFROX -NEW R2 BILLION PLUS HEALTHCARE GIANT TO OCCUPY NUMBER ONE SPOT
17 JUNE 1999
PRESS RELEASE
AFRICAN OXYGEN LIMITED (AFROX) ANNOUNCED TODAY THE FORMATION OF THE LARGEST
PRIVATE HEALTHCARE PROVIDER GROUP IN SOUTHERN AFRICA WITH SALES EXCEEDING R2
BILLION IN ITS FIRST FULL YEAR OF OPERATION.
THE NEW GROUP WILL BE FORMED FOLLOWING THE ACQUISITION BY AFROX OF A 55 PERCENT
INTEREST IN LIFECARE GROUP HOLDINGS (LIFECARE), AND THROUGH THAT A 40 PERCENT
STAKE IN THE JOHANNESBURG STOCK EXCHANGE LISTED COMPANY, PRESIDENT MEDICAL
INVESTMENTS LIMITED (PRESMED). THE REMAINING 45 PERCENT SHARES IN LIFECARE ARE
HELD BY REAL AFRICA HOLDINGS (REAL AFRICA) THE EMPOWERMENT GROUP, WHICH WILL
NOW BE AFROX'S HEALTHCARE PARTNER.
AFROX, THE COUNTRY'S FOREMOST GASES, WELDING AND HEALTHCARE COMPANY WITH ANNUAL
SALES OF R2,6 BILLION, AND PRESMED HAVE AGREED IN PRINCIPLE TO MERGE THEIR
ACUTE CARE HOSPITALS AND OTHER HEALTHCARE INTERESTS. THIS WILL BE ACHIEVED
THROUGH REVERSE LISTING THE AFROX HEALTHCARE DIVISION INTO PRESMED IN RETURN
FOR THE ISSUE OF SHARES. THIS WILL RESULT IN AFROX HOLDING 76 PERCENT OF THE
MERGED HEALTHCARE GIANT, TO BE NAMED AFROX HEALTHCARE LIMITED.
ANNOUNCING THE FORMATION OF THE NEW HEALTHCARE GROUP, AFROX'S CHAIRMAN AND
MANAGING DIRECTOR, ROYDEN VICE SAYS THE MERGER WILL CREATE A GROUP WITH THE
MOST COMPREHENSIVE GEOGRAPHICAL SPREAD OF ACUTE CARE HOSPITALS IN SOUTHERN
AFRICA. AFROX'S AND PRESMED'S 60 ACUTE CARE PRIVATE HOSPITALS AND SAME DAY
CLINICS HAVE OVER 6 000 BEDS AND CATER FOR MEDICAL AID AND PRIVATE PATIENTS.
THERE ARE 242 THEATRES AND ICUS IN 35 OF THESE ACUTE CARE HOSPITALS. WITH 34
EMERGENCY UNITS FORMING PART OF THESE FACILITIES, THE NEW GROUP WILL BE A MAJOR
PROVIDER OF THIS TYPE OF SERVICE. THE NEW HEALTHCARE GROUP ALSO HAS MINORITY
INTERESTS IN A FURTHER 11 HOSPITALS AND SAME DAY CLINICS WITH OVER 1 000 BEDS.
IN ADDITION, THE GROUP WILL INCLUDE AFROX OCCUPATIONAL HEALTHCARE, WHICH OFFERS
CONTRACTED ON-SITE OCCUPATIONAL AND PRIMARY HEALTHCARE TO OVER 85 000 EMPLOYEES
OF 140 COMPANIES THROUGHOUT SOUTH AFRICA;  DIRECT MEDICINES, THE LEADING
CHRONIC MEDICATION MANAGEMENT BUSINESS;  AFROX PHARMACY MANAGEMENT SERVICES,
AFROX'S PHARMACY MANAGEMENT AND PURCHASING BUSINESS; AND AN INTEREST IN A
LABORATORY SOFTWARE SERVICE OPERATION WHICH SUPPORTS OVER 20 MILLION TESTS A
YEAR.
IN VIEW OF ITS DIFFERENT MARKET AND THE UNIQUE SKILLS IT REQUIRES, LIFECARE
GROUP HOLDINGS, AND ITS MAIN OPERATING SUBSIDIARY LIFECARE SPECIAL HEALTH, WILL
BE MANAGED AS A SEPARATE BUSINESS UNIT. LIFECARE COMPRISES SOME 30 FACILITIES
NATIONALLY, WITH 11 800 BEDS. IT PROVIDES CARE FOR CHRONIC, ELDERLY AND FRAIL
PATIENTS ON A CONTRACTED BASIS TO GOVERNMENT. DON NCUBE, CHAIRMAN OF REAL
AFRICA, WILL REMAIN AS CHAIRMAN OF LIFECARE.
IN A MOVE WHICH BOOSTS THE EMPOWERMENT ELEMENT OF THE NEW HEALTHCARE GROUP, THE
PARTIES HAVE AGREED TO ASSIST REAL AFRICA TO RAISE ITS STAKE FROM 5 PERCENT TO
20 PERCENT.
ROYDEN VICE SAYS THE IMPORTANT PARTNERSHIP BETWEEN AFROX AND REAL AFRICA WILL
MEAN A BROADER SECTOR OF THE COMMUNITY SHARING IN THE GROWTH AND CONSIDERABLE
WEALTH CREATION AS A MAJOR EMPLOYER OF PRIVATE HEALTHCARE IN SOUTHERN AFRICA.
THE NEW GROUP WILL PROVIDE EMPLOYMENT TO SOME 9 000 PEOPLE IN ITS ACUTE CARE
INTERESTS, AND 3 700 IN LIFECARE SPECIAL HEALTH.
VICE SAYS THE BENEFITS OF THE MERGER ARE CONSIDERABLE, PARTICULARLY THE ABILITY
OF THE GROUP TO DRIVE COSTS DOWN AND SIMULTANEOUSLY TO PROVIDE QUALITY
HEALTHCARE OFF A VERY COMPETITIVE COST BASIS.
VICE BELIEVES THE MERGER OFFERS THE ABILITY TO COMPETE FOR VOLUME AT FIRMER
MARGINS.  "WE WILL BE ABLE TO DRIVE OPERATING COSTS DOWN WITH INCREASED
EFFICIENCIES, THE IMPLEMENTATION OF BEST OPERATING PRACTICES AND THE
RATIONALISATION OF DUPLICATED SERVICES."
"THE MERGER IS STRATEGIC FOR AFROX IN THAT IT PROVIDES A PLATFORM FROM WHICH TO
CONTINUE THE STRONG GROWTH OF THE LAST FEW YEARS. AFROX HEALTHCARE HAS SHOWN A
7 YEAR CAGR OF OVER 20 PERCENT. IN ADDITION TO THE STRATEGIC BENEFITS WHICH
WILL COME FROM BEING NUMBER ONE IN THE MARKET, WE WILL ALSO REALISE INCREASED
REVENUES AND IMPROVED PROFITABILITY. THIS WILL BE ACHIEVED THROUGH THE
CENTRALISING OF SERVICES SUCH AS FINANCE, THE OPTIMISATION  OF INFRASTRUCTURE,
ESPECIALLY IN THE AREAS OF PHARMACEUTICAL PURCHASING AND INFORMATION TECHNOLOGY
AND THE CREATION OF A SINGLE MANAGEMENT INFRASTRUCTURE, WITH REGIONAL STRENGTHS
IN SEVERAL AREAS OF THE COUNTRY. "
WITH REGARD TO THE BENEFITS IN TERMS OF THE MANAGED CARE MARKET AND
PUBLIC-PRIVATE SECTOR CO-OPERATION, VICE SAYS "OUR COMPETITIVENESS IN THE
GROWING MANAGED CARE MARKET WILL BE BOOSTED BY THE NEW NATIONAL HOSPITAL GROUP,
AS IT IS REPRESENTED IN ALL THE MAIN GEOGRAPHIC AREAS OF SOUTH AFRICA. THIS
WILL POSITION THE GROUP TO TAKE ADVANTAGE OF THE EXPECTED GROWTH IN THE PRIVATE
HOSPITAL MARKET, AS MEMBERSHIP OF MEDICAL SCHEMES IS FREED UP TO MORE SOUTH
AFRICANS."
"THE NEW GROUP'S NETWORK OF EMERGENCY FACILITIES ALSO PRESENTS AN OPPORTUNITY
FOR DEVELOPING PARTNERSHIPS WITH PROVINCIAL AND LOCAL EMERGENCY SERVICES," HE
ADDED.
TURNING TO QUALITY OF SERVICE, VICE SAYS AFROX AND PRESMED HAVE CONSIDERABLE
EXPERTISE IN HEALTHCARE EDUCATION, TRAINING AND DEVELOPMENT, AND WILL EXPAND
THESE INITIATIVES IN ORDER TO ENSURE THAT THE HIGHEST STANDARDS ARE MAINTAINED,
ESPECIALLY IN THE FIELD OF NURSING.   PRESMED OFFERS A VARIETY OF BASIC AND
POST BASIC COURSES THROUGH ITS SCHOOL OF NURSING.  AFROX RECENTLY ANNOUNCED THE
ESTABLISHMENT OF THE AFROX COLLEGE OF NURSING IN ASSOCIATION WITH THE
UNIVERSITY OF PORT ELIZABETH, IN RECOGNITION OF THE RESPONSIBILITY OF AND NEED
FOR THE PRIVATE SECTOR TO CONTRIBUTE TO THE DEVELOPMENT OF THE NATIONAL NURSING
RESOURCE. AFROX IS ALSO A LEADER IN OUTCOMES BASED LEARNING (OBL) TECHNIQUES.
VICE SAYS AFROX CONSIDERS THE DOCTORS AND OTHER HEALTHCARE PROFESSIONALS WHO
WORK IN THEIR HOSPITALS, AND THOSE WHO REFER PATIENTS TO THEM, AS VERY
IMPORTANT PARTNERS AND CUSTOMERS. THIS MERGER WILL ASSOCIATE THEM WITH THE
LARGEST NATIONAL NETWORK OF HOSPITAL CARE PROVIDERS, ABLE TO COMPETE IN THE
GROWING MANAGED CARE MARKET, AS WELL AS POSITIONING THEM FOR THE TRADITIONAL
FEE-FOR-SERVICE MARKET.
AFROX'S HEALTHCARE BUSINESS HAS PERFORMED EXTREMELY WELL. FOR THE YEAR ENDED
SEPTEMBER 1998, REVENUES WERE UP 40 PERCENT AT R1 BILLION AND PROFITS WERE 38
PERCENT HIGHER AT R139 MILLION.
PRESMED WAS FOUNDED IN 1985 BY CARL GRILLENBERGER, ITS PRESENT CHAIRMAN, AS A
PRIVATE HOSPITAL COMPANY. IT LISTED ON THE JOHANNESBURG STOCK EXCHANGE IN JUNE
1986. OVER THE PAST FOURTEEN YEARS THE COMPANY ACHIEVED A COMPOUND EARNINGS
GROWTH OF MORE THAN 20 PERCENT PER ANNUM. PRESMED RECENTLY PUBLISHED ITS YEAR
END RESULTS ENDED FEBRUARY. REVENUES WERE 17 PERCENT HIGHER AT R468 MILLION,
PROFITS UP 16 PERCENT AT R57 MILLION, WITH ATTRIBUTABLE PROFIT 23 PERCENT
HIGHER AT R31 MILLION.
SIMILARLY, LIFECARE IS A LONG ESTABLISHED BUSINESS, FOUNDED OVER 50 YEARS AGO.
WITH A TURNOVER OF R350 MILLION, THE COMPANY PROVIDES LONG-TERM CARE TO
PATIENTS ON BEHALF OF GOVERNMENT. "WE ARE VERY EXCITED ABOUT THE LIFECARE
INVESTMENT, AS IT WILL EXPAND OUR SERVICES TO THIS MARKET, AND WILL ALSO
DEVELOP FURTHER CO-OPERATIVE MODELS AND PARTNERSHIPS WITH THE PUBLIC HEALTHCARE
SECTOR.  AFROX HAS ALREADY IDENTIFIED FAMILIES, WHO CANNOT AFFORD PRIVATE
HEALTHCARE UNDER CONVENTIONAL DELIVERY SYSTEMS, AS A GROWTH OPPORTUNITY FOR THE
FUTURE."
VICE CONCLUDES, "THE MERGER WITH PRESMED WILL BRING TOGETHER A FORMIDABLE
MANAGEMENT TEAM WHICH WILL GUIDE  THE COMPANY AS THE NUMBER ONE QUALITY,
COST-EFFECTIVE HEALTHCARE PROVIDER IN SOUTHERN AFRICA. THIS TEAM WILL BE LED BY
RICK HOGBEN, THE MANAGING DIRECTOR OF AFROX HEALTHCARE."
DETAILS OF THE MERGER STILL NEED TO BE FINALISED AND ARE SUBJECT TO DUE PROCESS
AS SET OUT BY THE JSE AND THE REQUIREMENTS OF THE SECURITIES REGULATORY PANEL.
THE DEAL WILL ACQUIRE THE CONSENT OF A MAJORITY OF PRESMED SHAREHOLDERS, AND
THIS WILL BE SOUGHT IN THE NEAR FUTURE ONCE FORMAL NOTICES HAVE BEEN PUBLISHED.
WORK HAS, HOWEVER, ALREADY BEGUN ON THE DEVELOPMENT OF MANAGEMENT PLANS
NECESSARY TO BRING ABOUT THE BENEFITS WHICH WILL BE MADE POSSIBLE BY THE FINAL
MERGER. FURTHER DETAILS OF THE MERGER AND ITS FULL FINANCIAL IMPLICATIONS WILL
BE ANNOUNCED SHORTLY.
FINANCIAL DETAILS
THE PURCHASE PRICE OF THE REVERSE TAKEOVER OF PRESMED BY AFROX - EFFECTIVE 1
APRIL 1999 - WILL BE SETTLED BY  A COMBINATION OF NEW  PRESMED PAPER AND LOAN
ACCOUNT.
A TOTAL OF 155 MILLION NEW PRESMED ORDINARIES WILL BE ISSUED AT 312 CENTS A
SHARE - EQUIVALENT TO 70 PERCENT OF THE FULLY DILUTED SHARE CAPITAL OF PRESMED
BEFORE THE MERGER - AND A THREE-YEAR LOAN FROM AFROX TO PRESMED OF ABOUT R160
MILLION. THE FINAL AMOUNT OF  THE LOAN - WHICH WILL BEAR INTEREST AT MARKET
RATES - WILL BE FINALISED AFTER COMPLETION OF THE RECIPROCAL DUE DILIGENCE
PROCESS.
ANOTHER DIMENSION OF THE DEAL IS THAT AFROX ACQUIRES - ALSO EFFECTIVE 1 APRIL
1999 - A 55 PERCENT STAKE IN LIFECARE GROUP HOLDINGS LIMITED. ON THE MERGER
BECOMING UNCONDITIONAL, THE 40,7 PERCENT INTEREST WHICH LIFECARE HOLDS IN
PRESMED WILL BE DISTRIBUTED TO AFROX AND REAL AFRICA HOLDINGS LIMITED.
THIS WILL LEAVE AFROX HOLDING 76 PERCENT AND  REAL AFRICA 5 PERCENT
RESPECTIVELY IN PRESMED.
AFROX WILL THEN MAKE A STANDBY OFFER TO PRESMED SHAREHOLDERS AT 312 CENTS A
SHARE.
ENDS



                                        
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