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ASPEN HEALTHCARE HOLDINGS LIMITED
(FORMERLY MEDHOLD LIMITED)
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 85/02395/06)
("ASPEN")
THE FORMAL OFFER BY ASPEN TO ACQUIRE THE BUSINESSES OF SOUTH AFRICAN DRUGGISTS
LIMITED ("SAD")
1. INTRODUCTION
IT WAS ANNOUNCED ON THE STOCK EXCHANGE NEWS SERVICE ON 19 MARCH 1999 THAT ASPEN
HAD SUBMITTED THROUGH INVESTEC GROUP LIMITED ("INVESTEC"), THE CONTROLLING
SHAREHOLDER OF SAD, A FORMAL OFFER TO SAD ("THE SAD OFFER"). INVESTEC HAS
UNDERTAKEN TO PROCURE THAT THE SAD OFFER WILL BE ACCEPTED.
IN TERMS OF THE SAD OFFER, ASPEN WILL ACQUIRE, WITH EFFECT FROM THE CLOSE OF
BUSINESS ON 28 FEBRUARY 1999 ("THE EFFECTIVE DATE"), SIGNIFICANTLY THE WHOLE OF
THE BUSINESSES OF SAD ("THE SAD BUSINESS") AS A GOING CONCERN, EXCLUDING
INTEREST BEARING DEBT, AND CONSISTING OF THE PHARMACEUTICAL COMPANIES AND
BUSINESS ("THE PHARMACEUTICAL BUSINESS"), THE HEALTHCARE COMPANIES AND BUSINESS
("THE HEALTHCARE BUSINESS"), FINE CHEMICALS CORPORATION (PROPRIETARY) LIMITED
AND THE SERAVAC DIVISION OF PROCHEM (PROPRIETARY) LIMITED AND SERAVAC INC.
("THE CHEMICAL BUSINESS") (COLLECTIVELY REFERRED TO AS "THE SAD ACQUISITION").
2. THE MACMED HEALTH CARE LIMITED ("MACMED") DISPOSAL ("THE MACMED DISPOSAL")
SUBJECT TO THE SAD ACQUISITION BECOMING UNCONDITIONAL IN ALL RESPECTS, ASPEN
HAS ENTERED INTO AN AGREEMENT WITH MACMED IN TERMS OF WHICH IT HAS AGREED TO
SELL TO MACMED, WITH EFFECT FROM THE EFFECTIVE DATE, THE CHEMICAL BUSINESS AND
THE INTRAMED DIVISION OF PHARMACARE LIMITED ("INTRAMED") ("THE MACMED DISPOSAL
BUSINESSES") FOR AN ESTIMATED DISPOSAL CONSIDERATION OF R500 MILLION ("THE
MACMED DISPOSAL CONSIDERATION"). THE MACMED DISPOSAL CONSIDERATION WILL BE TEN
TIMES THE AGGREGATE RECURRING EARNINGS BEFORE TAX OF THE MACMED DISPOSAL
BUSINESSES FOR THE 12 MONTHS ENDED 28 FEBRUARY 1999, SUBJECT TO A MINIMUM
PURCHASE CONSIDERATION OF R200 MILLION FOR INTRAMED.
ASPEN HAS WARRANTED THAT THE EFFECTIVE DATE AGGREGATE NET TANGIBLE ASSET VALUE
OF THE MACMED DISPOSAL BUSINESSES WILL NOT BE LESS THAN R90 MILLION. IN THE
EVENT THAT THE AGGREGATE NET TANGIBLE ASSET VALUE OF THE MACMED DISPOSAL
BUSINESSES IS LESS THAN R90 MILLION, THE MACMED DISPOSAL CONSIDERATION WILL BE
REDUCED ACCORDINGLY. THE MACMED DISPOSAL BUSINESSES WILL BE ACQUIRED BY MACMED
EXCLUDING ANY INTEREST BEARING DEBT.
3. THE FEDSURE HOLDINGS LIMITED ("FEDSURE") DISPOSAL ("THE FEDSURE DISPOSAL")
SUBJECT TO THE SAD ACQUISITION BECOMING UNCONDITIONAL, ASPEN HAS ENTERED INTO
AN AGREEMENT WITH FEDSURE IN TERMS OF WHICH ASPEN HAS AGREED TO SELL THE
HEALTHCARE BUSINESS TO FEDSURE, WITH EFFECT FROM THE EFFECTIVE DATE, FOR A
CONSIDERATION OF R500 MILLION ("THE FEDSURE DISPOSAL CONSIDERATION").
THE SAD ACQUISITION, THE MACMED DISPOSAL AND THE FEDSURE DISPOSAL ARE
HEREINAFTER COLLECTIVELY REFERRED TO AS "THE TRANSACTIONS".
4. THE SAD ACQUISITION
4.1 TERMS OF THE SAD ACQUISITION
SUBJECT TO THE FULFILMENT OF THE CONDITIONS PRECEDENT SET OUT IN PARAGRAPH 4.5
BELOW, ASPEN WILL, WITH EFFECT FROM THE EFFECTIVE DATE, ACQUIRE THE SAD
BUSINESS, FOR A MAXIMUM PURCHASE CONSIDERATION OF R2 420 MILLION ("THE PURCHASE
CONSIDERATION") CALCULATED AS SET OUT IN PARAGRAPH
4.2 BELOW AND MADE UP AS FOLLOWS:
- R1 920 MILLION (SUBJECT TO A MAXIMUM DOWNWARD ADJUSTMENT OF
R120 MILLION) IN RESPECT OF THE PHARMACEUTICAL BUSINESS AND THE CHEMICAL
BUSINESS; AND
- R500 MILLION IN RESPECT OF THE HEALTHCARE BUSINESS.
4.2 ADJUSTMENTS TO THE PURCHASE CONSIDERATION
THE PURCHASE CONSIDERATION WILL BE ADJUSTED AS FOLLOWS:
4.2.1 BY R8,93 FOR EACH R1 BY WHICH THE PROFIT BEFORE TAX FOR THE 12-MONTH
PERIOD ENDED 28 FEBRUARY 1999 OF THE SAD BUSINESS, EXCLUDING THE HEALTHCARE
BUSINESS, ("PBT") IS LESS THAN
R215 MILLION; AND
4.2.2 BY THE AMOUNT BY WHICH THE NET TANGIBLE ASSET VALUE OF THE SAD BUSINESS
AT THE EFFECTIVE DATE, EXCLUDING THE HEALTHCARE BUSINESS, ("NTAV") IS LESS THAN
R750 MILLION.
THE PURCHASE CONSIDERATION WILL NOT BE REDUCED BELOW R2 300 MILLION. IF THE PBT
AND NTAV ARE LESS THAN R215 MILLION AND R750 MILLION RESPECTIVELY AND THE
SHORTFALL IS ATTRIBUTABLE TO THE SAME CAUSE, THE PURCHASE CONSIDERATION WILL
ONLY BE REDUCED IN TERMS OF PARAGRAPH 4.2.1 IN ORDER TO AVOID DOUBLE COUNTING.
4.3 THE NET PURCHASE CONSIDERATION
THE NET PURCHASE CONSIDERATION OF R1 420 MILLION BEING THE PURCHASE
CONSIDERATION NET OF THE MACMED DISPOSAL CONSIDERATION AND THE FEDSURE DISPOSAL
CONSIDERATION, WILL BE SETTLED AS FOLLOWS:
- R200 MILLION BY THE ISSUE OF RENOUNCEABLE LETTERS OF ALLOCATION IN RESPECT OF
50 000 000 ASPEN SHARES AT AN ISSUE PRICE OF 400 CENTS PER ASPEN SHARE TO BE
ISSUED IN TERMS OF A VENDOR PLACING;
- A MINIMUM AMOUNT OF R350 MILLION BY THE ISSUE OF RENOUNCEABLE LETTERS OF
ALLOCATION IN RESPECT OF A MINIMUM OF 58 333 333 ASPEN SHARES AT AN ISSUE PRICE
OF 600 CENTS PER ASPEN SHARE TO BE ISSUED IN TERMS OF A VENDOR PLACING; AND
- A MAXIMUM AMOUNT OF R870 MILLION IN CASH WHICH WILL BE FUNDED BY AN INTERIM
CALL LOAN FROM INVESTEC AND WHICH WILL BE REDUCED AS FOLLOWS:
- THE PUT OPTION OF R100 MILLION AS REFERRED TO IN PARAGRAPH 9 BELOW;
- R100 MILLION CASH INCLUDED IN THE NET PHARMACEUTICAL BUSINESS; AND
- THE DISPOSAL, IN THE SHORT-TERM, OF CERTAIN OF THE NON-CORE BUSINESSES TO BE
ACQUIRED IN TERMS OF THE SAD ACQUISITION WHICH WILL HAVE THE EFFECT OF
SUBSTANTIALLY REDUCING DEBT.
4.4 WARRANTIES
THE SAD OFFER DOES NOT CONTAIN ANY WARRANTIES.
4.5 CONDITIONS PRECEDENT
THE SAD ACQUISITION IS CONDITIONAL UPON, INTER ALIA, THE FULFILMENT OF THE
FOLLOWING CONDITIONS:
4.5.1 THE PASSING OF THE REQUISITE RESOLUTIONS BY SAD SHAREHOLDERS IN GENERAL
MEETING TO EFFECT AND IMPLEMENT THE DISPOSAL OF THE SAD BUSINESS; AND
4.5.2 THE PASSING OF THE REQUISITE RESOLUTIONS BY ASPEN SHAREHOLDERS IN GENERAL
MEETING TO EFFECT AND IMPLEMENT THE SAD ACQUISITION.
INVEGO INVESTMENTS LIMITED, A WHOLLY-OWNED SUBSIDIARY OF INVESTEC WHICH HOLDS
APPROXIMATELY 54% OF THE ISSUED SHARE CAPITAL OF SAD, HAS UNDERTAKEN TO VOTE IN
FAVOUR OF THE RESOLUTIONS REQUIRED TO GIVE EFFECT TO AND IMPLEMENT THE DISPOSAL
BY SAD OF THE SAD BUSINESS.
ASPEN SHAREHOLDERS HOLDING IN EXCESS OF 75% OF THE ISSUED SHARE CAPITAL OF
ASPEN HAVE UNDERTAKEN TO VOTE IN FAVOUR OF THE RESOLUTIONS REQUIRED TO GIVE
EFFECT TO AND IMPLEMENT THE TRANSACTIONS.
5. NATURE OF BUSINESS
5.1 NATURE OF BUSINESS OF ASPEN
ASPEN IS INVOLVED IN THE SOURCING, SALE AND DISTRIBUTION OF PHARMACEUTICAL,
PERSONAL AND HEALTHCARE PRODUCTS. ASPEN'S PRODUCT LINES INCLUDE OVER
400 PRODUCTS WHICH FALL INTO SIX CATEGORIES BEING ORIGINAL MOLECULE DRUGS,
GENERIC PRODUCTS, OVER THE COUNTER PHARMACEUTICALS, NATURAL PRODUCTS AND HEALTH
REMEDIES, BEAUTY AND PERSONAL CARE PRODUCTS AND HOUSEHOLD PRODUCTS.
THE PHARMACEUTICAL DIVISION IS ASPEN'S VALUE DRIVER AND DELIVERS 65% OF
TURNOVER AND 75% OF EARNINGS AND HAS A STRONG PROJECTED GROWTH RATE. THIS
DIVISION ACQUIRES UNDER-PROMOTED PHARMACEUTICAL AND HEALTH RELATED PRODUCTS
TYPICALLY FROM MULTI-NATIONAL DRUG COMPANIES OR LOCAL COMPANIES AND UNIQUE
SOUTH AFRICAN DEVELOPED PRODUCTS. THESE PRODUCTS ARE POSITIONED AND MARKETED
THROUGH A HIGHLY SUCCESSFUL SALES FORMULA DEVELOPED OVER TEN YEARS BY THE
FOUNDERS OF ASPEN. PRODUCTS ARE MANUFACTURED AND DISTRIBUTED BY THIRD PARTIES.
BRANDS ARE STRENGTHENED THROUGH LINE EXTENSIONS AND DEDICATED DIRECT SALES
TEAMS WITH PROMOTIONAL SUPPORT TEAMS.
THE GROWTH RATE OF THE BUSINESSES OF ASPEN HAS TO DATE EXCEEDED EXPECTATIONS
WHILST STILL MAINTAINING HEALTHY MARGINS AND LOW COST STRUCTURES.
5.2 NATURE OF BUSINESS OF THE NET PHARMACEUTICAL BUSINESS
SUBSEQUENT TO THE TRANSACTIONS, ASPEN WILL BE LEFT WITH THE PHARMACEUTICAL
BUSINESS EXCLUDING INTRAMED ("THE NET PHARMACEUTICAL BUSINESS").
THE NET PHARMACEUTICAL BUSINESS IS ONE OF SOUTH AFRICA'S LEADING PHARMACEUTICAL
BUSINESSES AND IS ENGAGED IN THE MANUFACTURE, MARKETING AND DISTRIBUTION OF
PHARMACEUTICAL PRODUCTS. ITS PRODUCT PORTFOLIO INCLUDES A COMPREHENSIVE RANGE
OF BRANDED AND GENERIC MEDICINES AND SELF MEDICATION PRODUCTS. EXISTING
DISTRIBUTION CHANNELS OF THE NET PHARMACEUTICAL BUSINESS BODE WELL FOR FUTURE
EXPANSION, BOTH LOCALLY AND OFFSHORE.
AMONGST OTHERS, POPULAR BRANDNAMES OF THE NET PHARMACEUTICAL BUSINESS INCLUDE
LENNON, GURONSAN, PERSIVATE, THINZ, VENTEZE AND LORIEN.
6. RATIONALE FOR THE TRANSACTIONS
THE ACQUISITION BY ASPEN OF THE NET PHARMACEUTICAL BUSINESS HAS PRESENTED A
UNIQUE OPPORTUNITY TO RATIONALISE A SIGNIFICANT SEGMENT OF THE SOUTH AFRICAN
PHARMACEUTICAL INDUSTRY.
THE TRANSACTIONS WILL RESULT IN AN ENLARGED PHARMACEUTICAL BUSINESS WITH
WORLD-WIDE COMPETITIVE PRODUCTS AND LICENSES, AND A CRITICAL MASS OF MORE THAN
1 000 REGISTERED PHARMACEUTICALS AND TRADEMARKS. THE ENLARGED ASPEN WILL HAVE
THE ABILITY TO RESPOND TO THE CHALLENGES FACING THE SOUTH AFRICAN
PHARMACEUTICAL COMPANIES IN THE DOMESTIC MARKET AND TO EXPAND REGIONALLY AND
INTERNATIONALLY. IT IS ANTICIPATED THAT THE INTEGRATION OF THE NET
PHARMACEUTICAL BUSINESS WILL IMPROVE THE PERFORMANCE OF THE ENLARGED ASPEN
THROUGH, INTER ALIA, INCREASED REPRESENTATION OF PRODUCTS THROUGH DEDICATED AND
FOCUSSED SALES TEAMS AND SIMPLIFIED STRUCTURES RESULTING IN EMPOWERED AND
INCENTIVISED STAFF.
THE ACQUISITION BY ASPEN OF THE NET PHARMACEUTICAL BUSINESS WILL POSITION IT TO
BENEFIT FROM ITS FOCUS ON GENERIC PRODUCTS THEREBY PROMOTING INCREASED ACCESS
TO AFFORDABLE MEDICINES IN SOUTH AFRICA AND THE SUB-CONTINENT. THE ACQUISITION
OF THE NET PHARMACEUTICAL BUSINESS WILL ENHANCE ASPEN'S CURRENT POSITION FOR
GENERIC SUBSTITUTION.
THE SAD ACQUISITION WILL GIVE ASPEN ACCESS TO VALUABLE PHARMACEUTICAL ASSETS
AND MANUFACTURING FACILITIES AS WELL AS THE SKILLS AND EXPERTISE OF ITS STAFF.
OPERATING SYNERGIES BETWEEN THE EXISTING BUSINESSES OF ASPEN AND THE NET
PHARMACEUTICAL BUSINESS WILL EMERGE ESPECIALLY WITH REGARD TO RATIONALISATION
OF HEAD OFFICE, DEVELOPMENT AND IT COSTS. IN ADDITION, THE CONSOLIDATION OF
MARKETING CHANNELS WILL RESULT IN IMPROVED EFFICIENCIES AND RELIABILITY IN
PRODUCT SUPPLY.
7. FINANCIAL EFFECTS
THE TABLE BELOW SETS OUT THE PRO FORMA FINANCIAL EFFECTS OF THE TRANSACTIONS
BASED ON:
- THE INTERIM RESULTS OF ASPEN FOR THE SIX MONTHS ENDED 31 DECEMBER 1998;
- THE ESTIMATED AFTER TAX PROFITS IN RESPECT OF THE NET PHARMACEUTICAL BUSINESS
FOR THE SIX MONTH PERIOD ENDED 28 FEBRUARY 1999;
- THE ESTIMATED NET TANGIBLE ASSET VALUE OF THE NET PHARMACEUTICAL BUSINESS AT
28 FEBRUARY 1999;
- THE NET PHARMACEUTICAL BUSINESS INCLUDING CASH OF R100 MILLION;
- THE EXERCISE OF THE PUT OPTION, REFERRED TO IN PARAGRAPH 9 BELOW, FOR A
CONSIDERATION OF R100 MILLION;
- THE ISSUE OF THE MINIMUM CONSIDERATION SHARES AS SET OUT IN PARAGRAPH
4.3 ABOVE AND THE ISSUE OF SHARES AS SET OUT IN PARAGRAPH 8 BELOW; AND
- AN AFTER TAX COST OF FUNDING OF 11,70%.
PRO FORMA INCREASE/
SIX MONTHS TO 31 DECEMBER 1998 BEFORE AFTER (DECREASE)
PER ASPEN SHARE (CENTS) (CENTS) %
EARNINGS AND HEADLINE EARNINGS 7,7 8,2 6,5
NET ASSET VALUE 18,5 162,8 780,0
NET TANGIBLE ASSET VALUE 18,5 (55,6) (400,5)
NOTE: THE ABOVE PRO FORMA FINANCIAL EFFECTS ARE BASED ON HISTORICAL NUMBERS.
HOWEVER, THE ASSETS ACQUIRED IN TERMS OF THE SAD ACQUISITION ARE EXPECTED TO
MAKE A MEANINGFUL CONTRIBUTION TO THE PROFITABILITY OF ASPEN IN THE FUTURE.
8. THE ISSUE OF SHARES
A PORTION OF THE ADVISERS' FEES PAYABLE IN RESPECT OF THE TRANSACTIONS WILL BE
SETTLED BY THE ISSUE OF 12 900 000 ASPEN SHARES WHICH, IN TERMS OF THE RULES OF
THE JOHANNESBURG STOCK EXCHANGE ("THE JSE"), IS DEEMED TO BE A SPECIFIC ISSUE
OF SHARES FOR CASH AND REQUIRES THE APPROVAL OF ASPEN SHAREHOLDERS IN GENERAL
MEETING.
ALL THE ASPEN SHARES TO BE ISSUED AS REFERRED TO IN THIS ANNOUNCEMENT WILL RANK
PARI PASSU WITH THE EXISTING ASPEN SHARES IN ISSUE.
THE ISSUE PRICE OF THE SHARES TO BE ISSUED BY ASPEN DOES NOT EXCEED A 10%
DISCOUNT ON THE 30 DAY WEIGHTED AVERAGE TRADED PRICE OF ASPEN SHARES ON THE JSE
TO 16 FEBRUARY 1999, BEING THE DATE ON WHICH THE JOINT CAUTIONARY ANNOUNCEMENT
WAS PUBLISHED BY ASPEN AND MACMED STATING THAT AN OFFER HAD BEEN MADE TO SAD.
9. THE PUT OPTION
IN TERMS OF THE MACMED DISPOSAL, ASPEN HAS THE RIGHT TO OFFER TO SELL TO MACMED
THE BUSINESSES COMPRISING THE PENICILLIN BUSINESS AND/OR ONCOLOGY BUSINESS
AND/OR ANY OTHER BUSINESS WHICH IS COMPATIBLE WITH THE BUSINESS CARRIED ON BY
MACMED FOR A MAXIMUM AGGREGATE CONSIDERATION OF R100 MILLION AND MACMED WILL BE
OBLIGED TO PURCHASE SUCH BUSINESSES. THE PURCHASE PRICE OF THE PUT BUSINESSES
WILL BE AN AMOUNT EQUAL TO TEN TIMES THE AGGREGATE RECURRING EARNINGS BEFORE
TAX OF EACH OF THE PUT BUSINESSES FOR THE 12 MONTHS ENDED 28 FEBRUARY 1999.
THE PURCHASE PRICE IN RESPECT OF THE PUT BUSINESSES WILL BE PAYABLE WITHIN FIVE
MONTHS FROM THE DATE ON WHICH THE OFFER IS MADE BY ASPEN TO MACMED.
10. DOCUMENTATION
A CIRCULAR, IN RESPECT OF THE TRANSACTIONS AND INCORPORATING A NOTICE OF
GENERAL MEETING OF ASPEN SHAREHOLDERS TO BE HELD AT 9:30 ON MONDAY, 10 MAY 1999
FOR THE PURPOSE OF CONSIDERING AND, IF DEEMED FIT, PASSING THE NECESSARY
RESOLUTIONS REQUIRED TO GIVE EFFECT TO, INTER ALIA, THE TRANSACTIONS, HAVE BEEN
POSTED TO SHAREHOLDERS.
DURBAN
26 APRIL 1999
MERCHANT BANK
INVESTEC BANK LIMITED
(REG. NO. 69/04763/06)
SPONSORING BROKER
INVESTEC SECURITIES LIMITED
MEMBER OF THE JOHANNESBURG STOCK EXCHANGE
(REGISTRATION NO. 72/08905/06)
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