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NETWORK HEALTHCARE HOLDINGS LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 96/08242/06)
("NETCARE")
CLINIC HOLDINGS LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 87/04106/06)
("CLINICS")
(COLLECTIVELY "THE NETCARE GROUP")
EXCEL MEDICAL HOLDINGS LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 97/04526/06)
("EXCEL")
TERMS ANNOUNCEMENT
1. INTRODUCTION
RAND MERCHANT BANK LIMITED ("RMB") AND INVESTEC BANK LIMITED ("INVESTEC") ARE
AUTHORISED TO ANNOUNCE THAT, FURTHER TO THE ANNOUNCEMENTS DATED 4 JUNE 1998 AND
2 OCTOBER 1998, THE HIGH COURT OF SOUTH AFRICA (TRANSVAAL PROVINCIAL DIVISION)
("THE COURT") HAS ORDERED THAT A MEETING OF EXCEL ORDINARY SHAREHOLDERS, OTHER
THAN NETCARE AND CLINICS ("CURRENT SCHEME MEMBERS") ("THE CURRENT SCHEME
MEETING"), BE CONVENED TO CONSIDER THE SCHEME OF ARRANGEMENT IN TERMS OF
SECTION 311 OF THE COMPANIES ACT, NO 61 OF 1973, AS AMENDED, PROPOSED BY
NETCARE AND CLINICS BETWEEN EXCEL AND THE CURRENT SCHEME MEMBERS ("THE CURRENT
SCHEME"). THE COURT HAS ALSO ORDERED THAT A MEETING OF PROSPECTIVE EXCEL
SHAREHOLDERS, BEING THOSE PARTIES WHICH WOULD BE ENTITLED TO THE ISSUE OF EXCEL
SHARES IN ACCORDANCE WITH CERTAIN AGREEMENTS ("THE ACQUISITION AGREEMENTS")
RELATING TO THE ACQUISITION OF EXCEL'S SUBSIDIARIES ("CONTINGENT SCHEME
MEMBERS") ("THE CONTINGENT SCHEME MEETING"), BE CONVENED TO CONSIDER THE SCHEME
OF ARRANGEMENT IN TERMS OF SECTION 311 OF THE COMPANIES ACT, NO 61 OF 1973, AS
AMENDED, PROPOSED BY NETCARE AND CLINICS BETWEEN EXCEL AND THE CONTINGENT
SCHEME MEMBERS ("THE CONTINGENT SCHEME") (THE CURRENT SCHEME AND CONTINGENT
SCHEME HEREIN REFERRED TO AS "THE SCHEMES"). SHOULD THE SCHEMES NOT BECOME
EFFECTIVE FOR WHATEVER REASON, CLINICS AND NETCARE WILL OFFER TO ACQUIRE ALL
THE EXCEL SHARES IN ISSUE ON THE SAME TERMS AND CONDITIONS AS THE SCHEMES ("THE
OFFER") (THE SCHEMES AND OFFER COLLECTIVELY REFERRED TO AS "THE PROPOSAL").
THE ORDERS OF COURT AND THE NOTICES CONVENING THE CURRENT SCHEME MEETING AND
CONTINGENT SCHEME MEETING RESPECTIVELY ARE PUBLISHED SIMULTANEOUSLY HEREWITH.
2. RATIONALE FOR THE PROPOSAL
THE ACQUISITION OF EXCEL BY THE NETCARE GROUP WILL PROVIDE A NUMBER OF BENEFITS
TO THE NETCARE GROUP AND TO EXCEL:
- THE ENLARGED NETCARE GROUP WILL ENHANCE ITS INFLUENCE IN THE PRIVATE
HEALTHCARE MARKET BY INCREASING ITS GEOGRAPHIC SPREAD, THIS FEATURE BEING AN
ESSENTIAL REQUIREMENT TO BE ABLE TO SERVICE THE RAPIDLY EVOLVING "MANAGED CARE"
MARKET IN SOUTH AFRICA.
- THE CHANGES AND THE NEW DYNAMICS IN HEALTHCARE TODAY DICTATE AND FAVOUR THE
NEED FOR INDUSTRY RATIONALISATION. IN ADDITION, IT IS ESSENTIAL TO ATTAIN A
SATISFACTORY CRITICAL MASS TO BE ABLE TO DELIVER ECONOMIC AND AFFORDABLE
HOSPITAL SERVICES.
- THE ACQUISITION OF EXCEL BY THE NETCARE GROUP NOT ONLY CONTRIBUTES TOWARDS
THIS RATIONALISATION AND CRITICAL MASS, BUT, HAVING REGARD TO THE COMMON VISION
OF EXCEL AND NETCARE, IT ADVANCES THE DELIBERATE PROVIDER-DRIVEN HEALTHCARE
OBJECTIVES OF BOTH GROUPS. EXCEL HOSPITALS ARE WELL MANAGED AND WILL CONTRIBUTE
POSITIVELY TO THE GROWTH IN EARNINGS OF THE NETCARE GROUP.
AS A RESULT OF THE SCHEMES BECOMING OPERATIVE, CURRENT AND CONTINGENT SCHEME
PARTICIPANTS WILL HAVE AN INTEREST IN A LISTED COMPANY WITH A SIGNIFICANTLY
INCREASED OPERATIONAL BASE, AN EXPANDED AND FINANCIALLY SOUND BALANCE SHEET AND
AN INCREASED SHAREHOLDER BASE. CURRENT AND CONTINGENT SCHEME PARTICIPANTS WILL
ALSO BENEFIT FROM THE INCREASED LIQUIDITY OF NETCARE SHARES. THE SCHEMES WILL
ALLOW EXCEL SHAREHOLDERS AND PROSPECTIVE EXCEL SHAREHOLDERS TO PARTICIPATE IN
NETCARE'S FUTURE DEVELOPMENT AS A SIGNIFICANT HEALTHCARE GROUP.
3. DETAILS OF THE PROPOSAL
NETCARE AND CLINICS ARE JOINTLY PROPOSING SCHEMES OF ARRANGEMENT, SUBJECT TO
CERTAIN CONDITIONS PRECEDENT:
- BETWEEN EXCEL AND THE CURRENT EXCEL SHAREHOLDERS WHEREBY CLINICS WILL ACQUIRE
ALL OF THE EXCEL SHARES IN RETURN FOR WHICH EACH EXCEL SHAREHOLDER WILL BE PAID
A CASH CONSIDERATION OF 1 664 CENTS AND THE RIGHT TO THE ALLOTMENT OF
62,3076923 CLINICS CONSIDERATION SHARES FOR EVERY 208 EXCEL SHARES HELD. THE
RIGHT TO THE ALLOTMENT OF CLINICS CONSIDERATION SHARES WILL AUTOMATICALLY BE
RENOUNCED IN FAVOUR OF NETCARE, WHICH WILL ISSUE 100 NETCARE SHARES FOR THE
RIGHT TO THE ALLOTMENT OF EVERY 62,3076923 CLINICS SHARES RENOUNCED TO IT.
CURRENT SCHEME PARTICIPANTS WILL THEREFORE EFFECTIVELY RECEIVE 800 CENTS IN
CASH AND 48,076923 NETCARE SHARES FOR EVERY 100 EXCEL SHARES HELD ON THE RECORD
DATE; AND
- BETWEEN EXCEL AND THE PROSPECTIVE EXCEL SHAREHOLDERS WHEREBY EACH PROSPECTIVE
EXCEL SHAREHOLDER WILL RECEIVE THE RIGHT TO THE ALLOTMENT OF 62,3076923 CLINICS
SHARES FOR EVERY 208 EXCEL SHARES WHICH WERE TO BE ISSUED TO THEM BY EXCEL
UNDER THE ACQUISITION AGREEMENTS. IN ADDITION, CLINICS WILL PAY 8 CENTS CASH
PER PROSPECTIVE EXCEL SHARE WHICH WOULD HAVE BEEN ISSUED, BUT FOR THE SCHEMES
BECOMING OPERATIVE. THE CLINICS CONSIDERATION SHARES WILL AUTOMATICALLY BE
RENOUNCED IN FAVOUR OF NETCARE, WHICH WILL ISSUE 100 NETCARE SHARES FOR EVERY
62,3076923 CLINICS SHARES RENOUNCED TO IT.
THE CONSIDERATION, BASED ON THE 15-DAY WEIGHTED AVERAGE NETCARE SHARE PRICE,
REPRESENTS A 64,2% PREMIUM TO THE 15-DAY WEIGHTED AVERAGE EXCEL SHARE PRICE FOR
THE PERIOD TO 25 SEPTEMBER 1998.
SHOULD THE EXCEL SCHEMES FOR ANY REASON NOT BECOME OPERATIVE, AN OFFER TO
CURRENT EXCEL SHAREHOLDERS OTHER THAN NETCARE AND CLINICS WILL BECOME
EFFECTIVE, AT THE SAME CONSIDERATION AS THE CURRENT SCHEME, LESS THE AMOUNT OF
ANY DIVIDENDS PAID BY EXCEL TO THE OFFEREES ("THE INITIAL OFFER").
SHOULD THE INITIAL OFFER BE SUCCESSFUL, AN OFFER ON SIMILAR TERMS AND
CONDITIONS WILL BE MADE TO PROSPECTIVE EXCEL SHAREHOLDERS WHOSE ENTITLEMENTS TO
EXCEL SHARES HAVE NOT BEEN FULFILLED AT THE TIME OF THE INITIAL OFFER.
UPON THE SCHEMES BECOMING OPERATIVE, OR IF AT LEAST 90% OF THE OFFEREES ACCEPT
THE OFFER, EXCEL WILL BECOME A WHOLLY OWNED SUBSIDIARY OF CLINICS AND THE
LISTING OF EXCEL ON THE JOHANNESBURG STOCK EXCHANGE ("THE JSE") WILL TERMINATE.
4. FINANCIAL EFFECTS ON EXCEL
WHILST IS EXPECTED THAT THE PROPOSAL WILL HAVE A POSITIVE EARNINGS IMPACT FOR
EXCEL SHAREHOLDERS IN FUTURE, BASED ON THE NOMINAL ASSUMPTION THAT THE PROPOSAL
HAD BEEN EFFECTIVE FOR THE SIX MONTHS ENDED 31 MARCH 1998 IN THE CASE OF
CLINICS AND NETCARE, AND FOR THE SIX MONTHS ENDED 31 JANUARY 1998 IN THE CASE
OF EXCEL, THE TABLE BELOW READ IN CONJUNCTION WITH THE NOTES AND ASSUMPTIONS
NUMBERED 1 AND 2 THEREAFTER SETS OUT THE HISTORIC FINANCIAL EFFECTS OF THE
PROPOSAL:
BEFORE AFTER PERCENTAGE
(CENTS) (CENTS) CHANGE
EARNINGS PER SHARE 4,2 3,2 (23,8)
NET ASSET VALUE
PER SHARE 41,6 36,4 (12,5)
MARKET VALUE PER
SHARE(1) 38,0 62,4 64,2
MARKET VALUE PER
SHARE(2) 95,0 108,0 13,7
NOTES AND ASSUMPTIONS:
1. BASED ON THE 15-DAY WEIGHTED AVERAGE PRICES FOR THE PERIOD TO 25 SEPTEMBER
1998.
2. BASED ON CLOSING MARKET PRICES ON 3 JUNE 1998, BEING THE LAST DATE PRIOR TO
THE ANNOUNCEMENT OF THE PROPOSAL.
5. FINANCIAL EFFECTS ON THE NETCARE GROUP
THE TABLE BELOW SETS OUT THE FINANCIAL EFFECTS OF THE PROPOSAL ON NETCARE AND
CLINICS, BASED ON THE FOLLOWING ASSUMPTIONS:
5.1 THE "BEFORE" COLUMNS REFLECT CLINICS' AND NETCARE'S EARNINGS PER SHARE FOR
THE SIX-MONTH PERIOD ENDED 31 MARCH 1998 AND NET ASSET VALUE PER SHARE ON THE
SAME DATE. THE "AFTER" COLUMNS INCLUDE THE EARNINGS OF EXCEL FOR THE SIX-MONTH
PERIOD ENDED 31 JANUARY 1998 AND THE NET ASSETS OF EXCEL ON THE SAME DATE;
5.2 CLINICS ACQUIRES 100% OF THE ISSUED ORDINARY SHARE CAPITAL OF EXCEL BASED
ON THE ESTIMATED NUMBER OF EXCEL SHARES; AND
5.3 NETCARE ISSUES NETCARE SHARES IN CONSIDERATION FOR THE RENOUNCEMENT OF THE
CLINICS CONSIDERATION SHARES IN TERMS OF THE PROPOSAL.
NETCARE CLINICS
BEFORE AFTER CHANGE BEFORE AFTER CHANGE
(CENTS) (CENTS) (%) (CENTS) (CENTS) (%)
EARNINGS
PER SHARE 5,1 5,6 9,8 10,3 10,9 5,8
TANGIBLE
NET ASSET
VALUE PER
SHARE 73,0 75,6 3,6 190,2 173,8 (8,6)
6. IMPORTANT DATES AND TIMES
1998
IN RELATION TO CLINICS
FORMS OF PROXY FOR THE GENERAL MEETING OF
SHAREHOLDERS TO BE LODGED BY NOT LATER
THAN 09:00 ON THURSDAY 29 OCTOBER
GENERAL MEETING OF SHAREHOLDERS TO BE HELD
AT 09:00 ON MONDAY 2 NOVEMBER
RESULTS OF GENERAL MEETING ANNOUNCED ON TUESDAY 3 NOVEMBER
LISTING OF CLINICS CONSIDERATION SHARES
COMMENCES ON MONDAY 7 DECEMBER
IN RELATION TO NETCARE
FORMS OF PROXY FOR THE GENERAL MEETING OF
SHAREHOLDERS TO BE LODGED BY NOT LATER
THAN 09:30 ON FRIDAY 30 OCTOBER
GENERAL MEETING OF SHAREHOLDERS TO BE HELD
AT 09:30 ON MONDAY 2 NOVEMBER
RESULTS OF GENERAL MEETING ANNOUNCED ON TUESDAY 3 NOVEMBER
LISTING OF NETCARE CONSIDERATION SHARES
COMMENCES ON MONDAY 7 DECEMBER
IN RELATION TO EXCEL
LAST DAY FOR RECEIPT OF FORMS OF PROXY FOR
THE CURRENT SCHEME MEETING BY 09:00 ON WEDNESDAY 11 NOVEMBER
LAST DAY FOR RECEIPT OF FORMS OF PROXY FOR
THE CONTINGENT SCHEME MEETING BY 09:30 ON WEDNESDAY 11 NOVEMBER
LAST DAY TO REGISTER IN ORDER TO VOTE AT THE
CURRENT SCHEME MEETING ON WEDNESDAY 11 NOVEMBER
LAST DAY TO REGISTER IN ORDER TO VOTE AT THE
CONTINGENT SCHEME MEETING ON WEDNESDAY 11 NOVEMBER
CURRENT SCHEME MEETING TO BE HELD AT
09:00 ON THURSDAY 12 NOVEMBER
CONTINGENT SCHEME MEETING TO BE HELD AT
09:30 ON THURSDAY 12 NOVEMBER
LODGE APPLICATIONS TO THE COURT TO SANCTION
THE SCHEMES ON TUESDAY 24 NOVEMBER
COURT HEARING TO SANCTION THE SCHEMES ON TUESDAY 1 DECEMBER
IF THE SCHEMES ARE SANCTIONED AND IMPLEMENTED
RECORD DATE TO DETERMINE PARTICIPATION IN THE
SCHEMES AT THE CLOSE OF BUSINESS ON FRIDAY 4 DECEMBER
TERMINATION OF THE LISTING OF EXCEL SHARES
ON THE JSE WITH EFFECT FROM THE CLOSE OF
BUSINESS ON FRIDAY 4 DECEMBER
OPERATIVE DATE OF THE SCHEMES ON MONDAY 7 DECEMBER
CONSIDERATION SHARE CERTIFICATES, CHEQUES
IN RESPECT OF THE CASH CONSIDERATION AND
FRACTIONAL ENTITLEMENTS WHERE APPLICABLE,
POSTED TO THE RELEVANT EXCEL SHAREHOLDERS
(IF DOCUMENTS OF TITLE ARE RECEIVED
PRIOR TO THE OPERATIVE DATE) ON OR, FAILING
THAT, WITHIN SEVEN BUSINESS DAYS OF RECEIPT
THEREOF BY THE TRANSFER SECRETARIES ON MONDAY 7 DECEMBER
IF THE SCHEMES DO NOT BECOME OPERATIVE
AND THE OFFER TAKES EFFECT
OFFER OPENS ON WEDNESDAY 2 DECEMBER
1999
CLOSING DATE OF THE OFFER, AT THE CLOSE
OF BUSINESS ON THURSDAY 8 JANUARY
RESULTS OF OFFER ANNOUNCED ON TUESDAY 12 JANUARY
COMPULSORY ACQUISITION OF SHARES BECOMES
EFFECTIVE (IF APPLICABLE) ON WEDNESDAY 24 FEBRUARY
A FURTHER ANNOUNCEMENT WILL BE PUBLISHED ON OR ABOUT MONDAY 7 DECEMBER 1998
REPORTING ON THE OUTCOME OF SCHEMES AND GENERAL MEETINGS AND THE APPLICATIONS
TO COURT.
7. OPINIONS AND RECOMMENDATION
7.1 OPINION AND RECOMMENDATION BY THE DIRECTORS OF EXCEL
THE DIRECTORS OF EXCEL HAVE CONSIDERED THE TERMS OF THE PROPOSAL AND ARE OF THE
OPINION THAT THEY ARE FAIR AND REASONABLE TO THE CURRENT SCHEME MEMBERS, THE
CONTINGENT SCHEME MEMBERS AND THE OFFEREES. ACCORDINGLY, THE BOARD OF DIRECTORS
OF EXCEL OTHER THAN MR F NDLOVU, RECOMMEND THAT CURRENT SCHEME MEMBERS VOTE IN
FAVOUR OF THE CURRENT SCHEME, CONTINGENT SCHEME MEMBERS VOTE IN FAVOUR OF THE
CONTINGENT SCHEME OR, ALTERNATIVELY, THAT THE OFFEREES ACCEPT THE OFFER. THE
DIRECTORS OF EXCEL WITH ENTITLEMENTS TO SHARES IN EXCEL, INTEND TO VOTE IN
FAVOUR OF THE CURRENT SCHEME AND THE CONTINGENT SCHEME AT THE RELEVANT SCHEME
MEETINGS OR, ALTERNATIVELY, ACCEPT THE OFFER.
7.2 OPINION BY INVESTEC
INVESTEC HAS ADVISED THE BOARD OF DIRECTORS OF EXCEL THAT IT HAS CONSIDERED THE
TERMS AND CONDITIONS OF THE PROPOSAL AND IS OF THE OPINION THAT THE CURRENT
SCHEME CONSIDERATION, CONTINGENT SCHEME CONSIDERATION AND THE OFFER
CONSIDERATION ARE FAIR AND REASONABLE TO CURRENT SCHEME MEMBERS, CONTINGENT
SCHEME MEMBERS AND OFFEREES.
8. DOCUMENTATION
A CIRCULAR, WHICH HAS BEEN APPROVED BY THE JSE, GIVING DETAILS OF THE PROPOSAL
AND CONTAINING A NOTICE OF GENERAL MEETING OF CLINICS SHAREHOLDERS AND A NOTICE
OF A GENERAL MEETING OF NETCARE SHAREHOLDERS, WILL BE POSTED TO SHAREHOLDERS OF
THE NETCARE GROUP TODAY.
A CIRCULAR, WHICH HAS BEEN APPROVED BY THE JSE AND THE SECURITIES REGULATION
PANEL, CONTAINING THE SCHEMES AND THE OFFER, WILL BE POSTED TO CURRENT AND
PROSPECTIVE EXCEL SHAREHOLDERS TODAY.
JOHANNESBURG
9 OCTOBER 1998
MERCHANT BANK FOR THE NETCARE GROUP
RAND MERCHANT BANK LIMITED
MERCHANT BANK FOR EXCEL
INVESTEC MERCHANT BANKING
INVESTEC BANK LIMITED
(REGISTRATION NUMBER 69/04763/06)
SPONSORING BROKER FOR THE NETCARE-GROUP
MERRILL LYNCH
SMITH BORKUM HARE
MEMBER OF THE JOHANNESBURG STOCK EXCHANGE
REGISTRATION NUMBER 95/01805/07
ATTORNEYS
RABIN, VAN DER BERG & PELKOWITZ MALLINICKS
ATTORNEYS
HR LEVIN
SPONSORING BROKER FOR EXCEL
INVESTEC SECURITIES
INCORPORATING FERGUSSON BROS.
INVESTEC SECURITIES LIMITED
MEMBER OF THE JOHANNESBURG STOCK EXCHANGE
REGISTRATION NO. 72/08905/06
ADVISORS TO THE MINORITIES OF CLINICS
ERNST & YOUNG
CORPORATE FINANCE
REPORTING ACCOUNTANTS
FISHER HOFFMAN SITHOLE
CHARTERED ACCOUNTANTS (SA)
REGISTERED ACCOUNTANTS AND AUDITORS
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