Wrap Text
Category 2 announcement regarding the acquisition of 30% of the equity in Rondebosch Medical Centre Proprietary Limi
RH BOPHELO LIMITED
(Previously Newshelf 1388 Proprietary Limited)
(Incorporated in the Republic of South Africa)
(Registration number: 2016/533398/06)
(JSE Share Code: RHB, ISIN: ZAE000244737)
("RH Bophelo" or "the Company")
CATEGORY 2 ANNOUNCEMENT REGARDING THE ACQUISITION OF 30% OF THE EQUITY IN
RONDEBOSCH MEDICAL CENTRE PROPRIETARY LIMITED AND THE ASSOCIATED CALL
OPTION (TO ACQUIRE AN ADDITIONAL 21% OF THE EQUITY IN RONDEBOSCH MEDICAL
CENTRE PROPRIETARY LIMITED) AND LOAN AGREEMENT
1. INTRODUCTION
RH Bophelo is pleased to announce that on 14 May 2018 it entered into transaction agreements
("Agreements"), through its wholly owned subsidiary, RH Bophelo Operating Company
Proprietary Limited ("RH Bophelo Opco"), in terms of which, upon the fulfilment or waiver (as the
case may be) of the conditions precedent in these Agreements, RH Bophelo Opco, will, inter alia -
- acquire 30% of the entire issued share capital in Rondebosch Medical Centre Proprietary
Limited ("RMC") by way of a subscription of RMC shares;
- provide funding to RMC by way of a shareholder loan; and
- acquire a call option ("Option"), which Option entitles RH Bophelo Opco to acquire an additional
21% of the issued shares in RMC (at the time of the additional acquisition) from the existing
majority shareholder at a fair market value to be determined at the time of exercise of the
Option upon (i) the 4th anniversary of RH Bophelo Opco's initial share subscription in RMC
("4th Anniversary"); or (ii) a defined trigger event prior to the occurrence of the 4th Anniversary,
as further detailed below. The Option provides RH Bophelo with a path to acquire further
shares in RMC in order to hold and exercise a controlling interest in RMC.
(collectively the "Acquisition").
2. INFORMATION ON RMC
RMC is an acute 123 bed (with the capacity and potential to reach above 200 beds)
independent private hospital conveniently located on Klipfontein Road, opposite the Red Cross
Children's Hospital, in Rondebosch, Cape Town. RMC was officially established in 2011 after
converting an existing 27 bed and 4 theatre day hospital license into an acute license and moving
the longstanding practice, which was originally established and has been operating since the late
1980s, to Rondebosch. RMC has grown incrementally with limited capital and the founders have
successfully applied to the Department of Health for an increase in beds over the years.
90% of the entire issued share capital of RMC is currently owned by Perthpark Properties
Proprietary Limited ("Perthpark"). The remaining 10% of issued shares in RMC is held by the
founding partners of RMC and persons related to them.
Perthpark wholly owns the company which owns the property and premises at which RMC is
situated ("Propco") and RMC leases the premises at which it is situated from Propco. The lease
agreement will be amended (as contemplated under Conditions Precedent below) and the parties
have agreed that RMC will be granted a long term lease arrangement, which will be registered as
such, to afford RMC security of tenure in its current location.
RMC has an operating agreement with Rondebosch Heart Company Proprietary Limited ("RHC") in
terms of which RMC grants RHC the exclusive right to operate a cardiac medical facility separately.
RHC pays a portion of the service and associated costs of RMC which portion is attributable to
that used for the cardiac facilities.
A pharmacy business, which is wholly owned by Perthpark, operates at the premises at which RMC
is situated ("RMC Pharmacy") and currently provides pharmaceutical and stock supply services to
RMC through a pharmacy agreement. It is the intention for either RMC or RH Bophelo Opco to
acquire at least 50% of the share capital of RMC Pharmacy, which is currently wholly owned by
Perthpark. RH Bophelo Opco and the existing shareholders have undertaken to agree and finalise
the terms of such transaction by no later than the 3rd month following the expiry of the 3 year period
following the subscription by RH Bophelo Opco, and on the basis that they shall fully and finally
implement such transaction by no later than the 4th Anniversary. See further details below under
Salient Terms of the Acquisition.
RMC currently offers the following services:
- Major theatres: 4
- Delivery rooms: 3
- Endoscopy suite: 1
- General medical and surgical unit: 62 beds
- Paediatric unit: 16 beds
- Paediatric intensive care unit: 3 beds
- Maternity unit: 10 beds
- Intensive care unit: 8 beds
- Neonatal intensive care unit: 5 beds
- High care unit: 4 beds
- Sub-acute unit: 10 beds
- Emergency unit: 5 beds
3. RATIONALE FOR THE ACQUISITION
The Acquisition represents a strategic opportunity for RH Bophelo to invest in a 123 bed acute
urban hospital, servicing a strategic region in Cape Town's metropolis. Whilst RH Bophelo Opco's
initial ownership position will be that of a minority stake, RH Bophelo Opco has entered into the
Option and as a result will be entitled to acquire an additional 21% and hence own a controlling
stake in RMC. Furthermore, the Acquisition provides RH Bophelo with, inter alia, the following:
- Quick access into the Cape Town metropolis, which is generally prohibitive due to its cost of entry;
- Entry into a growing market at an attractive price per bed;
- RMC is well positioned to cater for a wide array of income groups, including those from previously
disadvantaged population;
- RMC represents a facility and has doctors who are trusted in the community ensuring a loyal
patient base;
- RMC will serve as RH Bophelo's launch pad into the greater Cape Town community;
- The ability to move from a minority shareholding to a majority shareholding position in 4 years; and
- The capacity and potential to establish new units and increase from 123 beds to above 200 beds.
4. SALIENT TERMS OF THE ACQUISITION
Subscription by RH Bophelo Opco
RH Bophelo (through RH Bophelo Opco) will, inter alia, acquire 30% of the entire issued share
capital in RMC for a total consideration of R50.0 million as follows:
- The subscription of new ordinary shares in RMC for a subscription price of R0.2 million,
which shall rank pari passu in all respects with the ordinary shares held by the existing
shareholders in RMC; and
- An amount of R49.8 million, which will be contributed to RMC as a shareholder loan ("RHB
Loan").
Advance of the RHB Loan
- The RHB Loan shall only be used for the operations of the business of RMC, as further
detailed below (see Use of Funds)
- The RHB Loan will rank parri passu in all respects with all other shareholder loans;
- Any future interest calculated on the respective shareholder loans, as may be determined
by the board of directors of RMC from time to time, will accrue from the date of subscription by RH
Bophelo Opco.
- All shareholder loans, including the RHB Loan, will be subordinated in favour of the other
creditors of RMC, provided that in the event of an insolvency of RMC, all shareholders shall
be entitled to accelerate repayment of their respective loans, notwithstanding the
subordination; and
- Repayments by RMC of shareholder loans shall be made in the pro rata proportions which
the respective shareholders' loans bear out of the aggregate amount of shareholder loans
payable by RMC at such time.
Call Option
RH Bophelo Opco will have the Option to buy an additional 21% equity stake in RMC from
Perthpark on, inter alia, the following salient terms:
- the Option shall be capable of exercise by RH Bophelo Opco within a period of 6 months
following (i) the occurrence of the 4th Anniversary; or (ii) Perthpark and/or any of its
shareholders concluding an offer with any third party/ies pursuant to which the third
party/ies acquires at least 26% of the entire issued share capital of Perthpark, at any
time prior to the occurrence of the 4th Anniversary; or (iii) an act of insolvency in respect
of Perthpark; and
- the price at which the Option shall be exercised shall be determined at the time of
exercise and shall be the fair market value of the call option shares as agreed by
Perthpark and RH Bophelo Opco, and failing agreement within a prescribed time, a price
determined as the fair market value by an agreed independent expert.
Exercise of the Option will result in RH Bophelo Opco acquiring a controlling stake in RMC.
Undertaking to acquire RMC Pharmacy
It is the intention for either RMC or RH Bophelo Opco to acquire at least 50% of the share capital
of RMC Pharmacy, which is currently wholly owned by Perthpark. RH Bophelo Opco and the
existing shareholders have undertaken to agree and finalise the terms of such transaction by no
later than the 3rd month following the 3rd Anniversary (failing which, an independent expert shall
determine same) and on the basis that they shall fully and finally implement such transaction by no
later than the 4th Anniversary.
Warranties and indemnities typical of a transaction of this nature have been provided for. An amount
shall be retained by RMC in a ring-fenced account for a period of 2 years as security for any warranty
or indemnity claims instituted by RH Bophelo Opco.
5. USE OF FUNDS
RMC is currently in an expansion/growth phase, whereby R50 million will be used to support this
growth as follows:
- Recruiting and fitting additional specialists
- Expanding the emergency unit
- Refurbishment of the reception/admin
- Expansion of wards
- Establishment of new units and services
- Additional equipment as new doctors are recruited
- Working capital
- Increasing marketing/awareness
6. CONDITIONS PRECEDENT
The remaining conditions precedent in terms of the Acquisition to be fulfilled or waived (as the
case may be) by no later than 30 June 2018 (or such later date as the parties may agree to
in writing), are as follows:
- the various Agreements (subscription agreement, loan agreement and call option agreement)
are signed and become unconditional in accordance with their respective terms;
- an agreed form shareholders agreement is entered into between the existing shareholders of
RMC and RH Bophelo Opco and becomes unconditional in accordance with its terms;
- the memorandum of incorporation of RMC is amended (in the form agreed), adopted and filed
with the Companies and Intellectual Property Commission;
- RMC's shareholders pass the required statutory resolutions in terms of section 41(3) for the
issue of shares to RH Bophelo Opco;
- RH Bophelo's investment committee approves the transaction;
- to the extent required, any entity within RH Bophelo's group which is required in terms of the
JSE Listings Requirements, passes and delivers the board resolution (and if required, the
shareholder resolution) of such entity approving the transaction, as required by (and in terms
of) the JSE Listings Requirements as a Category 2 transaction;
- required transaction agreements relevant to the operations of RMC are entered into (on terms
acceptable to RH Bophelo Opco) and become unconditional in accordance with their
respective terms;
- service or restraint agreements are entered into between RMC and key individuals identified
by RH Bophelo as instrumental to the operations of RMC;
- RH Bophelo Opco confirms that it is satisfied with the steps and all necessary actions taken by
RMC to procure written exemption, condonation or dispensation from the Health Professions
Council of South Africa in respect of any non-compliance with rule 23A of the Ethical Rules of
Conduct for Practitioners registered under the Health Professions Act, 1974;
- the board of directors of RMC Pharmacy is re-constituted such that no board member thereof
is an "authorised prescriber" as contemplated in regulation 4(b) of the Regulations relating to
the Ownership and Licensing of Pharmacies;
- RMC opens a ring fenced interest bearing investment account, with signatories thereto being
persons having been nominated by RH Bophelo Opco to be directors of RMC;
- RMC amends the terms of its company bank account to include that payments over an agreed
monetary threshold will require the written approval of at least 2 directors of RMC, one of which
will have been nominated for election by RH Bophelo Opco;
- the board of directors of RMC resolves to redeem all debentures held by existing shareholders
of RMC on the basis that the redemption amount shall remain outstanding on loan account
against RMC (i.e. form part of the existing shareholders' loan accounts);
- RMC and the existing shareholders evidence to the satisfaction of RH Bophelo Opco that the
all existing debentures have been cancelled such that RMC no longer has any debentures in
issue; and
- the lessors from which RMC leases the premises at which it is situated provide written
undertakings in favour of RMC in terms of which they each agree that they will not terminate
any lease agreements concluded between each of them and any person providing services to
RMC (including, for example, any medical practitioners) without notifying RMC and RH
Bophelo Opco of such intention, providing them a reasonable opportunity to intervene and
mediate any dispute between the parties and without prior consultation with RMC and RH
Bophelo Opco.
7. FINANCIAL INFORMATION
The latest unaudited management accounts, as at 28 February 2018, which have been prepared
in terms of IFRS and which RH Bopheo is satisfied with the quality, showed that RMC had a net
asset value of R28.5 million and a net profit after tax of R1.4 million for the year ended 28 February
2018. The directors of RH Bophelo have performed a valuation of the projected future cash flows
of RMC and believes that the equity value of RMC (100%) will be between R34.6 million and R51.7 million
with the value of the Option being R120,000. Thisforecast has not been reviewed or reported on by the
company's auditors.
8. CATEGORISATION
The Acquisition qualify as Category 2 transaction in terms of the JSE Listings Requirements and
does not require shareholder approval.
9. INITIAL THRESHOLD
As noted in RH Bophelo's investment policy, in order to provide shareholders with additional
protection, shareholders are afforded the opportunity to vote on specific transactions up to
a threshold of R300 million, however, subject to the categorisation requirements of Section
9 of the JSE Listings Requirements. As a result, following the Acquisition and previous acquisitions
made since listing, RH Bophelo requires approval from shareholders (subject to section 9 of the
JSE Listings Requirements) for further transactions of R163.2 million.
Johannesburg
15 May 2018
Corporate Advisors: Third Way Investment Partners Proprietary Limited and Birkett Stewart
McHendrie Proprietary Limited
Sponsor: Deloitte & Touche Sponsor Services Proprietary Limited
Legal Advisor: ENSafrica (Edward Nathan Sonnenbergs Inc.)
Date: 15/05/2018 11:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
