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African Oxygen Limited - Disposal By Afrox Of Its 69% Stake In Afrox Healthcare

Release Date: 17/11/2003 09:01:01      Code(s): AFX
AFRICAN OXYGEN LIMITED - DISPOSAL BY AFROX OF ITS 69% STAKE IN AFROX HEALTHCARE 
LIMITED TO AN EMPOWERMENT CONSORTIUM                                            
AFRICAN OXYGEN LIMITED                                                          
(Registration number 1927/000089/06)                                            
(Incorporated in the Republic of South Africa)                                  
("Afrox")                                                                       
ISIN Code: ZAE000030920                                                         
JSE Share Code: AFX                                                             
DISPOSAL BY AFROX OF ITS 69% STAKE IN AFROX HEALTHCARE LIMITED TO AN EMPOWERMENT
CONSORTIUM                                                                      
1.   Introduction                                                               
Further to the cautionary announcements dated 14 July 2003, 25 August 2003 
     and 06 October 2003, JPMorgan is authorised to announce that the Board of  
     Directors of Afrox ("the Board") has reached agreement with Business       
     Venture Investments No 790 (Proprietary) Limited ("Bidco"), a consortium of
Black Economic Empowerment ("BEE") investors led by Brimstone Investment   
     Corporation Limited ("Brimstone") and Mvelaphanda Strategic Investments    
     (Proprietary) Limited ("Mvelaphanda") for the sale by Afrox of its entire  
     stake in Afrox Healthcare Limited ("Afrox Healthcare")("the Transaction"). 
Afrox Healthcare will become the first significant BEE owned and controlled
     private hospital and healthcare group in South Africa.  The Transaction    
     materially contributes to empowerment by increasing the spread of ownership
     of assets amongst historically disadvantaged persons.                      
Implementation of the Transaction will result in an offer being made to the
     minority shareholders of Afrox Healthcare in accordance with the rules of  
     the JSE Securities Exchange South Africa ("JSE") and the Securities        
     Regulation Panel ("SRP") to acquire their shares by way of a Scheme of     
Arrangement ("the Scheme") at the same price as has been agreed for the    
     sale of Afrox"s holding, namely R13.85 per share, escalated at an effective
     rate of 5.60% per annum from 01 October 2003 to the date of the Scheme     
     being implemented or the date on which the Alternative Sale (as defined    
below) is concluded, being the operative date.  Afrox Healthcare           
     shareholders recorded on the share register on 23 January 2004 will also be
     entitled to retain the dividend of R0.40 declared for the year ended 30    
     September 2003.  Further details of the terms and conditions of the        
Transaction are set out below.                                             
2.   Rationale For The Transaction                                              
     Afrox has derived substantial growth from Afrox Healthcare and the Board   
     believes that the healthcare business has attained the requisite scale and 
level of sophistication such that operating as an autonomous empowered     
     entity will enable it to pursue its own growth initiatives without         
     restriction.                                                               
     The Board further believes that a deal which provides Afrox Healthcare with
a BEE partner is a significant advantage in remaining competitive and      
     positioned to pursue new investment opportunities in the healthcare sector,
     locally and internationally.                                               
     The Transaction will allow Afrox, which is a subsidiary of The BOC Group   
plc ("BOC") to concentrate on growing as a dedicated industrial gases      
     business in line with BOC"s global strategy; and this, taken together with 
     the advantages flowing to Afrox Healthcare has the potential to unlock     
     significant value for both Afrox and Afrox Healthcare.                     
3.   Overview Of Afrox Healthcare                                               
     Afrox Healthcare is a private healthcare service provider listed on the    
     JSE.  Afrox Healthcare was formed in 1999 through the merging and reverse  
     listing of the healthcare operations of Afrox into President Medical       
Investments Limited, subsequently re-named Afrox Healthcare Limited.       
     Operations consist of private hospitals and healthcare services.           
     The hospital division forms the bulk of Afrox Healthcare"s business and    
     comprises interests in 63 hospitals throughout South Africa, of which 9 are
associate hospitals, as well as one hospital in Gaborone, Botswana.        
     The hospital division also includes Afrox Rehabilitation, which specialises
     in acute, outcomes-driven physical and cognitive rehabilitation for        
     patients disabled by traumatic brain or spinal injury, stroke or other     
disabling conditions.                                                      
     The healthcare services division includes Lifecare Special Health, a public
     private-partnership with the government, which has 21 chronic care         
     hospitals and two acute-care hospitals; Direct Medicines, a pharmaceutical 
benefit management company and Afrox Occupational Healthcare, a leading    
     provider of contracted on-site healthcare to corporates.                   
     In addition to the hospital and healthcare services, Afrox Healthcare has  
     the following ancillary services: Afrox College of Nursing and ER24, a     
national emergency service network.                                        
     Afrox Healthcare published its financial results for the year to September 
     2003 on 29 October 2003.  They demonstrated another outstanding performance
     with revenue of R4,475 million (up 15% from 2002), operating profit before 
finance costs of R571 million (up 19% from 2002), headline earnings per    
     share of 138.2c (up 22% from 2002) and cash generated from operations of   
     R733 million (up 35% from 2002).                                           
4.   Overview of Bidco                                                          
Bidco has been incorporated solely for the purpose of acquiring the issued 
     share capital of Afrox Healthcare.  A consortium of BEE investors, led by  
     Brimstone and Mvelaphanda will subscribe for approximately 75% of Bidco"s  
     equity.  The BEE consortium includes nationally and regionally based doctor
and empowerment groupings ensuring broad based empowerment.  Medi-Clinic   
     Corporation Limited ("Medi-Clinic"), a private hospital company listed on  
     the JSE, will subscribe for a minority non-controlling shareholding in     
     Bidco not exceeding 25%.                                                   
5.   Structure And Terms Of The Transaction                                     
     The cash purchase consideration per Afrox Healthcare share is R13.85,      
     escalated at an effective rate of 5.60% per annum from 01 October 2003 to  
     the date of the Scheme being implemented or the date on which the          
Alternative Sale (as defined below) is concluded, being the operative date.
     For illustrative purposes, assuming the operative date is 30 April 2004,   
     the total amount payable per Afrox Healthcare share and its implied value  
     to Afrox is as follows:                                                    
Per share      Rand     
                                                            value   million     
                                                                   value to     
                                                                      Afrox     
Cash consideration                                         R13.85     2,141     
Escalation at an effective rate of 5.6% per annum           R0.45        70     
Offer consideration                                        R14 30     2,211     
Final dividend declared for the year ended 30               R0.40        62     
September 2003 (1)                                                              
Composite amount                                           R14.70     2,273     
(1)  Afrox Healthcare shareholders recorded on the share register on 23 January 
     2004 will be entitled to retain the dividend of R0.40 per share declared   
for the year ended 30 September 2003.                                      
     Bidco is to acquire the shares in Afrox Healthcare by means of a Scheme    
     between Afrox Healthcare and the Afrox Healthcare shareholders in terms of 
     section 311 of the Companies Act.  If the Scheme fails to take effect and  
become operative, an alternative sale will take effect whereby Bidco will  
     purchase the Afrox Healthcare shares held by Afrox, followed by a mandatory
     offer to minority shareholders ("the Alternative Sale").                   
6.   Irrevocable                                                                
An irrevocable undertaking has been obtained from BOC Holdings, which hold 
     56% in Afrox, to vote in favour of the Transaction at a meeting of         
     shareholders of Afrox, which will be called to approve the Transaction.    
7.   Conditions Precedent                                                       
Assuming the Transaction is implemented by way of the Scheme, the          
     Transaction is subject to, amongst others, the fulfilment of the following 
     suspensive conditions:                                                     
     *    approval of the Transaction in terms of the Competition Act, 1998, by 
31 July 2004 or such later date (being no later than 30 September     
          2004) to which Afrox has elected to extend;                           
     *    the obtaining of all necessary shareholder approvals;                 
     *    the approval of and consent to, in so far as may be necessary, the    
appropriate documentation and agreements by the JSE and the SRP, and  
          the obtaining of all other regulatory approvals that may be required; 
     *    that the Scheme is agreed to by a majority representing not less than 
          three-quarters of the votes exercisable by Afrox Healthcare           
shareholders present at the Scheme meeting;                           
     *    that the Court sanctions the Scheme; and                              
     *    the operative date of the Scheme being on or before 31 May 2004 after 
          which the Alternative Sale will be implemented; provided that if the  
only outstanding condition on 31 May 2004 is the approvals in terms of
          the Competition Act, that date of 31 May 2004 will be extended to     
          31 July 2004.                                                         
     Assuming the Alternative Sale, the Transaction is subject to, amongst      
others, the fulfilment of the following suspensive conditions:             
     *    approval for the Transaction in terms of the Competition Act, 1998, by
          31 July 2004 or such later date as agreed between Afrox and Bidco; and
     *    the approvals, in so far as may be necessary, of the appropriate      
documentation by the JSE, the SRP and other regulatory approvals that 
          may be required.                                                      
8.   Financial Effects Of The Transaction On Afrox                              
     The table below shows the per share effects of the sale of Afrox Healthcare
for the twelve months ended 30 September 2003. The pro forma financial     
     effects have been prepared for illustrative purposes only and, because of  
     its nature, may not fairly present Afrox"s financial position, changes in  
     equity, results of operations or cash flows at 30 September 2003, or the   
effect on future earnings.  Financial effects are determined in accordance 
     with the Listings Requirements of the JSE.                                 
                                   Historical          After the           %    
                                   Before (1)          Transaction (2,5,6)      
Change                                            
     Amounts in cents per share                                                 
     Net asset value (3)                693.3          996.7        43.8%       
     Basic earnings (4)                 165.1          446.4        170.4%      
Headline earnings (7)              166.5          136.5        (18.0%)     
     Weighted average number                                                    
     of shares in issue (`000)               335 767        335 767             
     Weighted average diluted                                                   
number of shares in issue (`000)   335 767        335 767                  
     Number of shares in issue (`000)   342 853        342 853                  
     Notes:                                                                     
     1.   Extracted from the published financial results of Afrox for the year  
ended 30 September 2003.                                              
     2.   Pro forma financial effects after the transaction.                    
     3.   In relation to the pro forma net asset value per share it is assumed  
          that the transaction was effective 30 September 2003.                 
4.   In relation to the pro forma earnings and headline earnings per share,
          it is assumed that the transaction was effective on 1 October 2002.   
     5.   The proceeds of 154 603 934 shares in Afrox Healthcare at R14.30 per  
          share remains in cash and cash equivalents, earning interest on a     
weighted average after tax interest rate of 6.3%, after taking into   
          account the payment of transaction costs.                             
     6.   The capital gains tax was calculated using the market value of an     
          Afrox Healthcare share at 30 September 2001 of R8.20.                 
7.   The profit on the disposal of Afrox Healthcare is excluded in the     
          calculation of headline earnings per share.                           
9.   Application Of The Sale Proceeds Of The Transaction                        
     The intention is for Afrox to distribute the net proceeds to shareholders. 
Further details of this distribution will be made available in due course. 
10.  Withdrawal Of Cautionary Announcement                                      
     The cautionary announcement dated 06 October 2003 regarding the strategic  
     options of the relationship between Afrox and Afrox Healthcare is hereby   
withdrawn.                                                                 
11.  Distribution Of Circular                                                   
     A circular to Afrox shareholders, convening an Afrox general meeting to    
     approve this Transaction, will be posted to shareholders in due course.    
This circular will be posted at the same time as the Afrox Healthcare      
     Scheme documentation, which will be done as soon as possible following the 
     opening of the courts in January 2004.                                     
Johannesburg                                                                    
17 November 2003                                                                
Financial Advisers to Afrox:                                                    
JPMorgan                                                                        
Legal Advisers to Afrox:                                                        
Bowman-Gilfillan                                                                
Competition Law Advisers to Afrox:                                              
Edward Nathan & Friedland                                                       
Transaction Sponsor:                                                            
JPMorgan                                                                        
Sponsor to Afrox                                                                
Nedbank Corporate                                                               
Date: 17/11/2003 09:01:07 AM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             
                                                                                
                                                                                
                                                                                



                                        
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