Medclin -- Mpilo 1 BEE Transaction terms











Highlights
*Medclin will repurchase 23 377 488 listed ordinary Medclin shares (˘Medclin Shares÷) from Mpilo 1 (˘Specific Repurchase÷).
*Mpilo 1 will use a portion of the proceeds of the Specific Repurchase to settle existing funding and fund the exit of certain shareholders of MP1 Investment Holdings (Pty) Ltd. (˘MP1÷). In addition, Mpilo 1 will raise additional funding from third party financiers on more favourable and sustainable terms than those pertaining to the existing funding.
*Mpilo 1 will use the remaining proceeds and additional funding to capitalise K2014232755 (South Africa) (Pty) Ltd. (to be renamed as Mpilo 1 Newco (RF) (Pty) Ltd.) (˘Mpilo 1 Newco÷), which will subscribe for 23 377 488 new Medclin Shares (˘Specific Issue÷).
*The Lock-In Period, as defined below, will be extended by an additional three years to 31 December 2019.

Introduction and rationale
Medclin shareholders are advised that Medclin and Mpilo 1 have agreed to the Mpilo 1 BEE Restructure. Mpilo 1 was established as a majority black-owned company to acquire and hold an equity interest in Medclin as part of the BEE transaction implemented by Medclin and Mpilo 1 in December 2005 (˘Mpilo 1 BEE Transaction÷). MP1 is the holding company of Mpilo 1. Mpilo 1 currently holds 23 377 488 Medclin Shares which equates to 2.69% of the entire issued share capital of Medclin as at 1 July 2015, being the last practicable date for finalisation of this announcement (˘Last Practicable Date÷). Pursuant to the Mpilo 1 BEE Transaction, the period during which Mpilo 1 may not dispose of its shareholding in Medclin (˘Lock-In Period÷) will end on 31 December 2016.

The Mpilo 1 BEE Transaction has been successful as the structure has de-geared significantly and significant value has been created for the Mpilo 1 BEE Transaction participants. The significant value in Mpilo 1 has also created an opportunity to restructure and achieve the following outcomes:
*refinance the relatively expensive current funding package utilised by Mpilo 1 to fund the Mpilo 1 BEE Transaction, with lower priced funding on market related and sustainable terms;
*accommodate the exit of certain MP1 shareholders who wish to exit within the Lock-In Period or who are not prepared to extend the Lock-In Period, without materially negatively impacting Mpilo 1Ăs contribution to MedclinĂs BEE ownership credentials;
*realise a portion of the value that has been created for the benefit of the Mpilo 1 BEE Transaction participants;
*reduce the discount on a pre-emptive repurchase by Medclin from the 10% currently provided for in the applicable transaction documents to 5% in order to facilitate an extension of the BEE structure;
*extend the Lock-In Period in respect of 17 533 116 Medclin Shares (˘Restricted Medclin Shares÷) by an additional three years from 31 December 2016 to 31 December 2019, thereby ensuring that the BEE structure remains in place until the end of 2019; and
*reduce the financial risk profile of the Mpilo 1 BEE Transaction by the long-term de-gearing of the structure.

Mpilo 1 BEE Restructure steps
The Mpilo 1 BEE Restructure steps are set out below. The Specific Repurchase and Specific Issue will be implemented on the first business day following the date upon which the last of the conditions precedent, as set out in paragraph 6 below, are fulfilled (˘Implementation Date÷).The Specific Repurchase and Specific Issue will be priced at the lower of (i) the 30 day volume weighted average price (˘VWAP÷) of a Medclin Share calculated up to and including the last trading day before the Implementation Date, or such other date as may be agreed in writing, or (ii) the amount approved by RMB's credit committee as being the commitment under the bridge facility agreement, to be entered into between, amongst others, Medclin and FirstRand Bank Ltd. (acting through its Rand Merchant Bank division) (˘RMB÷), (˘Bridge Facility Agreement÷) at the applicable time (and which as at the Last Practicable Date is an amount equal to R2 9 billion (two billion nine hundred million Rand)), divided by the number of Medclin Shares being repurchased from Mpilo 1 (˘Restructure Share Price÷). For illustrative purposes, all amounts included in the steps below are based on R104.83 (one hundred and four Rand and eighty three cents) per Medclin Share, being the 30 day VWAP of a Medclin Share up to the Last Practicable Date.

Intraday bridge facility
Pursuant to the Bridge Facility Agreement RMB provides an intraday bridge facility to Medclin (˘Bridge Facility÷), which will be used by Medclin for the Specific Repurchase.

Specific Repurchase
Medclin repurchases 23 377 488 Medclin Shares from Mpilo 1 at the Restructure Share Price in terms of the agreement entered into between the Company and MP1 in relation to the Specific Repurchase (˘Repurchase Agreement÷). The aggregate repurchase price is estimated to amount to approximately R2 450 700 000.00 (two billion four hundred and fifty million seven hundred thousand Rand). As a result, Medclin will cancel and delist the 23 377 488 Medclin Shares repurchased as soon as possible following the Implementation Date. Accordingly, the number of treasury shares held by Medclin following the Specific Repurchase will remain at 13 663 378 Medclin Shares. The aggregate repurchase price in respect of Medclin Shares repurchased will be settled with the proceeds of the Bridge Facility.

Redemption of the redeemable preference shares
Mpilo 1 uses approximately R700 600 000.00 (seven hundred million six hundred thousand Rand) of the proceeds of the Specific Repurchase to redeem its existing preference share funding (used to fund the acquisition of the Medclin Shares currently held by it). A portion of the proceeds from the Specific Repurchase will also be used by Mpilo 1 to discharge certain expenses associated with the Mpilo 1 BEE Restructure.

Dividend distribution
Mpilo 1 distributes a portion of the remaining proceeds from the Specific Repurchase equating to approximately R439.9 million (four hundred and thirty nine million nine hundred thousand Rand) to MP1 as a dividend. The balance of the remaining proceeds from the Specific Repurchase (i.e. approximately R1 310 200 000.00 (one billion three hundred and ten million two hundred thousand Rand)) remain within Mpilo 1.

Exiting MP 1 Shareholders
MP1 utilises the distribution proceeds to repurchase its shares held by the exiting MP1 shareholders. MP1 at the same time restructures its ultimate shareholding to ensure that it remains majority black-owned in order to ensure continued compliance with Medclin's BEE requirements.

New external funding
Mpilo 1 issues new preference shares to third party financiers on more favourable and sustainable terms than those pertaining to the existing preference share funding.

Capitalisation
The remaining portion of the proceeds of the Specific Repurchase after distribution and redemption of its existing preference share funding, and the new preference share funding raised by Mpilo 1 from third party financiers, is used by Mpilo 1 to subscribe for shares in the authorised share capital of Mpilo 1 Newco, which will be constituted as a wholly-owned subsidiary of Mpilo 1.

Specific Issue
Mpilo 1 Newco uses the subscription proceeds received from Mpilo 1 pursuant to Mpilo 1Ăs subscription for shares in the authorised share capital of Mpilo 1 Newco, to subscribe, at the Restructure Share Price, for 23 377 488 new Medclin Shares, being equivalent to the number of Medclin Shares held by Mpilo 1 at the date immediately preceding the Mpilo 1 BEE Restructure, in terms of the agreement entered into between the Company and Mpilo 1 Newco in relation to the Specific Issue (˘Subscription Agreement÷). As a result, Medclin will issue and list 23 377 488 new Medclin Shares to Mpilo 1 Newco.

Repayment of the intraday Bridge Facility
Medclin repays the Bridge Facility with the funds raised via the Specific Issue.

Lock-In Period
A new shareholders agreement will be entered into between Mpilo 1 Newco, Mpilo 1, MP1 and Medclin (˘Shareholders Agreement÷). Mpilo 1 Newco will be free to dispose of up to 5 844 372 Medclin Shares at any time after 31 December 2015. The extension of the Lock-In Period in relation to the Restricted Medclin Shares from 31 December 2016 to 31 December 2019 will represent a three year extension. Mpilo 1 Newco will be permitted to hedge a portion of the Restricted Medclin Shares in order to manage the risk profile of the Mpilo 1 BEE Restructure.

Medclin will retain a pre-emptive right in respect of any disposal of the Restricted Medclin Shares following expiry of the Lock-In Period. However, the discount at which Medclin will be entitled to acquire the Restricted Medclin Shares in terms of such pre- emptive right will, in order to facilitate the extension of the Lock-In Period, be reduced from 10% to 5%.

BEE shareholding of Mpilo 1
The existing effective black shareholding in Mpilo 1 is 50.04%. In terms of the Mpilo 1 BEE Restructure, the exiting MP1 shareholders will exit (as described in paragraph 2.5.), while Eveni Medical Investments (Pty) Ltd., one of the remaining long term BEE shareholders will increase its shareholding such that the effective black shareholding in Mpilo 1 will be at 50.74%.

Financial assistance
The Bridge Facility, which will be used by Medclin to fund the Specific Repurchase, and all the security provided by Medclin in connection therewith, will ultimately enable Mpilo 1 Newco to subscribe for new Medclin Shares (˘Financial Assistance÷). If and to the extent that these arrangements may be regarded to amount to financial assistance by Medclin as contemplated in section 44 of the Companies Act, No. 71 of 2008 (as amended) (˘Companies Act÷), the Board may not authorise the provision of such Financial Assistance unless such Financial Assistance is given pursuant to a special resolution of Shareholders adopted within the previous two years, which special resolution approved the provision of such Financial Assistance either to a specific recipient or generally to a category of potential recipients and the specific recipient falls within that category.

Financial effects of the Mpilo 1 BEE Restructure
The pro forma financial effects of the Mpilo 1 BEE Restructure have been prepared for illustrative purposes only and due to the nature thereof, may not fairly present MedclinĂs financial position, changes in equity, results of operations or cash flows after completion of the Mpilo 1 BEE Restructure. The pro forma financial effects are the responsibility of the directors and are based on the audited results for the year ended 31 March 2015. The purpose of the pro forma financial effects is to illustrate the impact of the Mpilo 1 BEE Restructure had it been implemented on the dates and on the assumptions set out below. It does not purport to be indicative of what the financial results would have been had the Mpilo 1 BEE Restructure been implemented on a different date.


Conditions precedent
The implementation of the Mpilo 1 BEE Restructure shall be subject to the fulfilment or waiver (to the extent legally permissible) of the following conditions precedent by no later than 31 August 2015:
*obtaining the necessary shareholder approval for the Mpilo 1 BEE Restructure by way of Medclin shareholders approving the necessary resolutions required in connection with the:
-Specific Repurchase in terms of section 5.69(b) of the JSE Ltd.'s (˘JSE÷) Listings Requirements;
-Specific Issue in terms of section 5.51(g) of the JSE Listings Requirements; and
-Financial Assistance;
*Mpilo 1 securing the requisite funding to fund part of the subscription price of the new Medclin Shares in terms of the Specific Issue;
*the requisite funding documents becoming unconditional in accordance with their terms, and no material adverse event or similar impediment occurring prior to draw-down thereunder;
*the Shareholders Agreement and the Bridge Facility Agreement being signed and becoming unconditional in accordance with their terms;
*the Repurchase Agreement and the Subscription Agreement becoming unconditional in accordance with their terms;
*obtaining any required regulatory approval, including approval from the South African competition authorities of the change in control of Circle Group Holdings (Pty) Ltd., one of the MP1 shareholders who contributed initial and subsequent capital required to facilitate the investment in Medclin by Mpilo 1, which occurs as part of the Mpilo 1 BEE Restructure; and
*obtaining any consents or waivers required under the existing funding arrangements.

Resolutive condition
The Specific Repurchase is subject to a resolutive condition that if by 17:00 on the same day as the Specific Repurchase is implemented (or such later date as Medclin may agree to) the Specific Issue has not occurred, the Specific Repurchase will automatically lapse and the parties shall be restored to their position as if the Specific Repurchase was never entered into.

Notice of general meeting
Notice is hereby given that a general meeting of the Medclin shareholders will be held at Neethlingshof Estate, Stellenbosch on Tuesday, 11 August 2015 at 15h00 in order to consider and, if deemed fit, to pass the resolutions to be approved by the Medclin shareholders in order to implement the Mpilo 1 BEE Restructure. The notice of general meeting is included in a circular to the Medclin shareholders setting out, inter alia, the terms of the Mpilo 1 BEE Restructure. The circular will be posted by registered mail to the Medclin shareholders on Monday, 13 July 2015. The salient dates pertaining to the general meeting, which are also contained in the circular, are set out in the table below.
*Record date for Medclin shareholders to be eligible to receive the circular: Friday, 3 July
*Circular posted to Medclin shareholders on: Monday, 13 July
*Last day to trade in order to be eligible to attend and vote at the general meeting: Friday, 24 July
*Record date in order to determine which Medclin shareholders are entitled to attend and vote at the general meeting: Friday, 31 July
*Last day for Medclin shareholders to lodge forms of proxy for the general meeting by: 15h00 on Friday, 7 August
*General meeting to be held at: 15h00 on Tuesday, 11 August
*Results of the general meeting released on SENS on: Wednesday, 12 August
*Results of the general meeting published in the South African press on: Thursday, 13 August
*Results of the general meeting published in the Namibian press on: Friday, 14 August





2015-07-09 10:51:46