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Acquisition of Respiratory Care Africa Proprietary Limited
ASCENDIS HEALTH LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2008/005856/06)
ISIN: ZAE000185005 JSE share code: ASC
(“Ascendis” or “the Company”)
ACQUISITION OF RESPIRATORY CARE AFRICA PROPRIETARY LIMITED (“RCA”)
1. Introduction
Ascendis shareholders are advised that the Company has entered into an agreement dated 11
June 2014 (“the Agreement”) with Sean Reitz (“SR”), the trustees of the Lotheringen Family
Trust (“LFT”), RMB Corvest 7 Proprietary Limited (“Corvest”) and Shalamuka Capital Proprietary
Limited (“Shalamuka”) (collectively “the Sellers”), in terms of which Ascendis will acquire 100%
of the issued ordinary share capital of RCA (“the Acquisition”), with effect from 1 May 2014
(“Effective Date”). The Acquisition will conclude upon the fulfillment of the conditions precedent
as set out in paragraph 3.2 below (“Closing Date”).
2. Rationale for the Acquisition
Ascendis intends scaling its medical devices platform, which currently consists of Surgical
Innovations Proprietary Limited (“Surgical Innovations”) operating within the Pharma-Med
Division, to become a leading provider of medical devices throughout South Africa. RCA has
been identified as a complementary distributor of medical devices which will enhance Ascendis’
ability to service hospitals, clinics and government tenders on a turnkey basis within a growing
market. Ascendis has thus pursued this Acquisition with the intention of integrating RCA into its
Pharma-Med Division whilst continuing to maintain the independence of RCA in terms of its
business obligations.
RCA is a 15-year old medical device business, which distributes and services a range of capital
equipment and related surgical consumables, specialising specifically in critical care. RCA has
key agencies for medical equipment catering to the intensive care unit, neonatal intensive care
unit and the operating theatre, which are all complementary to those offered by Surgical
Innovations. RCA employs over 100 people and has achieved compound annual growth in
revenue of circa 18% over the last five years.
3. Salient features of the Acquisition
3.1 The Purchase Consideration is:
3.1.1 A maximum amount of up to R130 582 440 (“Initial Purchase Price”); plus
3.1.2 A maximum amount of up to R18 000 000 relating to profit target payments
(“Performance Tranches”) which are payable to SR as follows:
3.1.2.1 within ten business days following the finalisation of the Company’s
June 2016 audited financial statements (“First Performance
Tranche Payment”); and
3.1.2.2 within ten business days following the finalisation of the Company’s
June 2017 audited financial statements (“Second Performance
Tranche Payment”)
(collectively “Purchase Consideration”).
3.1.3 The Initial Purchase Price will be discharged by Ascendis in cash and shares as
follows:
3.1.3.1 A maximum amount of up to R95 581 310 by means of a cash
payment on the Closing Date (“Cash Settled Portion”); and
3.1.3.2 Delivering a maximum of up to 1 366 305 Ascendis shares on the
Closing Date (“Closing Date Shares”) at a price of R11.00 per
Closing Date Share; and
3.1.3.3 Delivering so many Ascendis shares on the first anniversary of the
Closing Date which when multipled by the 30-day volume weighted
average price (“VWAP”) on the anniversary of the Closing Date will
result in a maximum payment of up to R19 971 770 (“First
Anniversary Shares”). The VWAP is limited to a minimum of R10
per First Anniversary Share
(Closing Date Shares and First Anniversary Shares collectively
being the “Equity Settled Portion”).
3.1.4 The Performance Tranches will be discharged by Ascendis in cash or Ascendis
shares at the election of the Company on the basis of RCA achieving certain
gross profit targets.
3.2 Conditions precedent
The Acquisition is subject to, inter alia, the following key conditions precedent:
3.2.1 Ascendis obtaining the audited financial statements of RCA for the year ended
30 April 2014 by no later than 26 June 2014 in order to confirm the Purchase
Consideration, subject to the maximum amounts as detailed in paragraph 3.1;
and
3.2.2 SR entering into a service agreement with RCA by no later than 17 June 2014
for a defined period of time commencing on the Closing Date (“Service
Agreement”); and
3.2.3 Ascendis and the Sellers obtaining such regulatory approvals necessary to
enable them to implement the Acquisition, including the consent of the
Competition Authorities, by no later than 19 September 2014.
3.3 Warranties and indemnities
Warranties and indemnities applicable to the Acquisition are standard for transactions of
this nature.
3.4 Other significant terms of the Acquisition
3.4.1 In terms of the Service Agreement, SR is restrained, for a defined period of time,
from acquiring an interest in any business that competes with RCA or Surgical
Innovations or directly or indirectly being involved, in any way, in any business
that competes with RCA or Surgical Innovations within Africa, Madagascar and
Mauritius.
4. Unaudited pro forma financial effects (“Financial Effects”) of the Acquisition
The table below sets out the Financial Effects of the Acquisition on the Company’s most recently
published interim earnings per share (“EPS”), headline earnings per share (“HEPS”), fully diluted
earnings per share (“Diluted EPS”), net asset value per share (“NAV”) and net tangible asset
value per share (“NTAV”). The Financial Effects and the preparation thereof, which is the
responsibility of the directors of Ascendis, have been prepared for illustrative purposes only, and
because of their nature, may not give a fair reflection of the Company’s financial position and
results of operations, nor the effect and impact of the Acquisition on Ascendis going forward. In
order to accurately reflect the impact of similar periods, the management accounts of RCA for
the 6 month period ending 30 April 2014 have been incoporated within the Financial Effects
below.
6 MONTHS as at Pro forma for 6
31 December MONTHS as at 31
2013 - Before the December 2013 - After
Acquisition the Acquisition Change
4
(cents) (cents) (%)
1,3,5,7,8,9
HEPS 29 35 18
1,3,5,7,8,9
EPS 29 35 18
1,3,5,7,8,9
Diluted EPS 29 35 18
2,3,6,7
NAV 552 567 3
2,3,6,7
NTAV 99 74 (25)
Weighted average and total shares in 183,437,103 185,118,844 1
3,7
issue
Notes:
1. For the purposes of calculating HEPS, EPS and Diluted EPS, the amounts in the “31 December 2013 - Before
the Acquisition” column are based on Ascendis’ statement of comprehensive income for the interim period ended
31 December 2013, as announced on SENS on 3 March 2014.
2. For the purposes of calculating NAV and NTAV, the amounts in the “31 December 2013 - Before the Acquisition”
column are based on Ascendis’ statement of financial position for the interim period ended 31 December 2013,
as announced on SENS on 3 March 2014.
3. The weighted average and total shares in issue of 183,437,103 used for purposes of calculating HEPS, EPS,
Diluted EPS, NAV and NTAV in the “31 December 2013 - Before the Acquisition” column, are based on
Ascendis’ statement of comprehensive income and statement of financial position for the interim period ended 31
December 2013, as announced on SENS on 3 March 2014, and consists of the Ascendis shares in issue of
184,581,045 less treasury shares held of 1,143,942 as at 31 December 2013.
4. The amounts in the “Pro forma 31 December 2013 - After the Acquisition” column have been calculated using
the management accounts of RCA for the six months ended 30 April 2014. These amounts represent the profit
before tax amount adjusted by an assumed tax rate of 28% after taking into account non-recurring expenses of
R2.6 million (pre-tax) relating to directors’ salaries and bonuses and R0.2 million (pre-tax) relating to advisory
services. A tax rate of 28% is assumed for all “Pro-forma 31 December 2013 - After the Acquisition” column
adjustments.
5. For the purposes of calculating the pro forma HEPS, EPS and Diluted EPS, it was assumed that the Acquisition
was effective on 1 July 2013 and a post-tax lending rate of 6.5% was applied to the Cash Settled Portion of the
Core Purchase Price and the Performance Tranches, resulting in an implied interest expense of R7.4 million.
6. For the purposes of calculating NAV and NTAV, it was assumed that the Acquisition was effective on 31
December 2013 and that the net debt position is increased by an amount equal to the sum of the Cash Settled
Portion of the Core Purchase Price and the Performance Tranches. The allocation of the Purchase
Consideration resulted in an increase of intangible assets of R82 million.
7. Pro forma HEPS, EPS, Diluted EPS, NAV and NTAV have been calculated using the pro forma weighted
average and total number of shares in issue, as applicable, for the six month period ended 31 December 2013 of
184,581,045 shares less treasury shares held of 1,143,942 as per published interim results with the Equity
Settled Portion of the Core Purchase Price to be issued as at 31 December 2014 assumed to be in the form of
newly issued shares and not a reduction in treasury shares held.
8. Despite the Effective Date of the transaction being 1 May 2014, the date on which Ascendis will start to account
for RCA’s earnings is from the Closing Date onwards, and therefore the consolidated accounts for Ascendis for
the year ended June 2014 will not reflect the earnings of RCA.
5. Categorisation of the Acquisition
The Acquisition is categorised as a Category 2 transaction in terms of the JSE Limited Listings
Requirements.
11 June 2014
Johannesburg
Ascendis Sponsor
Investec Corporate Finance
Ascendis Arranger and Financial Advisor
Coast2Coast Investments
Ascendis Tax Advisor
Mazars
Corvest Attorney
DLA Cliffe Dekker Hofmeyr
Date: 12/06/2014 08:00:00 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
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