Wrap Text
Terms announcement relating to the proposed restructure of the Mpilo 1 BEE Transaction
Mediclinic International Limited
Incorporated in the Republic of South Africa
(Registration number 1983/010725/06)
JSE share code: MDC
NSX share code: MCI
ISIN: ZAE000074142
(“Mediclinic” or “the Company” or “the Group”)
TERMS ANNOUNCEMENT RELATING TO THE PROPOSED RESTRUCTURE OF THE MPILO
INVESTMENT HOLDINGS 1 (RF) PROPRIETARY LIMITED (“MPILO 1”) BLACK ECONOMIC
EMPOWERMENT (“BEE”) TRANSACTION (“MPILO 1 BEE RESTRUCTURE”)
Highlights
- Mediclinic will repurchase 23 377 488 listed ordinary Mediclinic shares (“Mediclinic 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 Proprietary Limited (“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) Proprietary Limited (to be renamed as Mpilo 1 Newco (RF) Proprietary Limited) (“Mpilo 1
Newco”), which will subscribe for 23 377 488 new Mediclinic Shares (“Specific Issue”).
- The Lock-In Period, as defined below, will be extended by an additional three years to 31
December 2019.
1. Introduction and rationale
Mediclinic shareholders are advised that Mediclinic 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 Mediclinic as part of the BEE transaction implemented by Mediclinic 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 Mediclinic Shares which equates to 2.69% of the entire issued share capital of
Mediclinic 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 Mediclinic (“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 1’s contribution to Mediclinic’s 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 Mediclinic 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 Mediclinic Shares (“Restricted Mediclinic
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.
2. 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 Mediclinic 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, Mediclinic and FirstRand Bank
Limited (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 900 000 000.00 (two billion nine hundred million Rand)), divided by the number of Mediclinic
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 Mediclinic Share, being the 30 day VWAP of a Mediclinic Share up to the
Last Practicable Date.
2.1 Intraday bridge facility
Pursuant to the Bridge Facility Agreement RMB provides an intraday bridge facility to
Mediclinic (“Bridge Facility”), which will be used by Mediclinic for the Specific
Repurchase.
2.2 Specific Repurchase
Mediclinic repurchases 23 377 488 Mediclinic 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, Mediclinic will
cancel and delist the 23 377 488 Mediclinic Shares repurchased as soon as possible
following the Implementation Date. Accordingly, the number of treasury shares held by
Mediclinic following the Specific Repurchase will remain at 13 663 378 Mediclinic Shares.
The aggregate repurchase price in respect of Mediclinic Shares repurchased will be
settled with the proceeds of the Bridge Facility.
2.3 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 Mediclinic 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.
2.4 Dividend distribution
Mpilo 1 distributes a portion of the remaining proceeds from the Specific Repurchase
equating to approximately R439 900 000.00 (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.
2.5 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 Mediclinic's
BEE requirements.
2.6 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.
2.7 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.
2.8 Specific Issue
Mpilo 1 Newco uses the subscription proceeds received from Mpilo 1 pursuant to Mpilo
1’s subscription for shares in the authorised share capital of Mpilo 1 Newco, to subscribe,
at the Restructure Share Price, for 23 377 488 new Mediclinic Shares, being equivalent to
the number of Mediclinic 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, Mediclinic will issue and list 23 377 488 new Mediclinic Shares to Mpilo 1 Newco.
2.9 Repayment of the intraday Bridge Facility
Mediclinic repays the Bridge Facility with the funds raised via the Specific Issue.
2.10 Lock-In Period
A new shareholders agreement will be entered into between Mpilo 1 Newco, Mpilo 1, MP1
and Mediclinic (“Shareholders Agreement”). Mpilo 1 Newco will be free to dispose of up
to 5 844 372 Mediclinic Shares at any time after 31 December 2015. The extension of the
Lock-In Period in relation to the Restricted Mediclinic 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 Mediclinic Shares in order to manage the risk profile
of the Mpilo 1 BEE Restructure.
Mediclinic will retain a pre-emptive right in respect of any disposal of the Restricted
Mediclinic Shares following expiry of the Lock-In Period. However, the discount at which
Mediclinic will be entitled to acquire the Restricted Mediclinic 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%.
3. 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 Proprietary Limited, 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%.
4. Financial assistance
The Bridge Facility, which will be used by Mediclinic to fund the Specific Repurchase, and all the
security provided by Mediclinic in connection therewith, will ultimately enable Mpilo 1 Newco to
subscribe for new Mediclinic Shares (“Financial Assistance”). If and to the extent that these
arrangements may be regarded to amount to financial assistance by Mediclinic 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.
5. 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 Mediclinic’s 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.
The effect on earnings, headline earnings, normalised headline earnings, net asset value (“NAV”)
and tangible NAV (“Tangible NAV”) per share have been reflected below:
% increase /
(decrease) as a
Audited Adjustments for Pro forma after result of the Mpilo
the Mpilo 1 BEE the Mpilo 1 BEE 1 BEE Restructure
(Note 1) Restructure Restructure (Note 2)
Earnings per ordinary share
(cents) (Note 3)
- Basic 509.5 - 509.5 0.0%
- Diluted 500.0 - 500.0 0.0%
Headline earningsper
ordinary share (cents) (Note 3)
- Basic 483.9 - 483.9 0.0%
- Diluted 474.9 - 474.9 0.0%
Normalised headline earnings
per ordinary share (cents)
(Note 3)
- Basic 408.2 - 408.2 0.0%
- Diluted 400.6 - 400.6 0.0%
NAV per share (cents) (Note 4) 3 752.5 3 752.5 0.0%
Tangible NAV per share
(cents) (Note 4) 2 399.0 2 399.0 0.0%
Weighted average number of
ordinary shares (m) 843.4 - 843.4 0.0%
Weighted average number of
ordinary shares - diluted (m) 859.3 - 859.3 0.0%
Number of ordinary shares in 868.0 - 868.0 0.0%
issue (m)
Number of ordinary shares in
issue net of treasury shares (m) 854.5 - 854.5 0.0%
Notes:
1. Extracted from Mediclinic’s audited group results for the year ended 31 March 2015.
2. Represents the pro forma financial effects after the Mpilo 1 BEE Restructure.
3. Earnings, headline earnings and normalised headline earnings per share adjustments are based on
the following principal assumptions:
- the Specific Repurchase will be funded by the proceeds of the Bridge Facility. On the
assumption that the 30 day VWAP of Mediclinic Shares on the Last Practicable Date is R104.83
(one hundred and four Rand and eighty three cents), the Bridge Facility will increase cash and
liabilities by up to approximately R2 450 700 000.00 (two billion four hundred and fifty million
seven hundred thousand Rand). The Company will use the proceeds of the Specific Issue to
repay the Bridge Facility. All of these cash-flows are anticipated to occur on the same day and
no interest income or expense will be incurred as a result of the Specific Repurchase and
Specific Issue;
- the Mpilo 1 BEE Restructure was effected on 1 April 2014; and
- total estimated transaction costs of R220 000.00 (two hundred and twenty thousand Rand)
were incurred, which are once off in nature. Mpilo 1 will fund all other expenses relating to the
Mpilo 1 BEE Restructure.
4. NAV and Tangible NAV adjustments are based on the following principal assumptions:
- the Specific Repurchase will be funded by the proceeds of the Bridge Facility. On the
assumption that the 30 day VWAP of Mediclinic Shares on the Last Practicable Date is R104.83
(one hundred and four Rand and eighty three cents), the Bridge Facility will increase cash and
liabilities by up to approximately R2 450 700 000.00 (two billion four hundred and fifty million
seven hundred thousand Rand). The Company will use the proceeds of the Specific Issue to
repay the Bridge Facility. All of these cash-flows are anticipated to occur on the same day and
the share capital, cash and liability positions would be exactly the same before and after the
Specific Repurchase and Specific Issue have been concluded;
- the Mpilo 1 BEE Restructure was effected on 31 March 2015;
- total estimated transaction costs of R220 000.00 (two hundred and twenty thousand Rand)
were incurred. Mpilo 1 will fund all other expenses relating to the Mpilo 1 BEE Restructure; and
- Mediclinic has (under the existing BEE structure) and will continue to have a pre-emptive right
to buy back Mediclinic Shares at a discount. The related derivative asset was never accounted
for in the past due to the level of estimation uncertainty involved in valuation of the asset and
the amounts involved being immaterial. The derivative asset will continue to be accounted for at
zero book value following the implementation of the Mpilo 1 BEE Restructure.
6. 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
Mediclinic shareholders approving the necessary resolutions required in connection with
the:
- Specific Repurchase in terms of section 5.69(b) of the JSE Limited'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
Mediclinic 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 Proprietary
Limited, one of the MP1 shareholders who contributed initial and subsequent capital
required to facilitate the investment in Mediclinic 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.
7. 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 Mediclinic 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.
8. Notice of general meeting
Notice is hereby given that a general meeting of the Mediclinic 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 Mediclinic shareholders in order
to implement the Mpilo 1 BEE Restructure. The notice of general meeting is included in a circular
to the Mediclinic shareholders setting out, inter alia, the terms of the Mpilo 1 BEE Restructure. The
circular will be posted by registered mail to the Mediclinic 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.
2015
Record date for Mediclinic shareholders to be eligible to receive the Friday, 3 July
circular
Circular posted to Mediclinic 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 Mediclinic shareholders are
entitled to attend and vote at the general meeting Friday, 31 July
Last day for Mediclinic 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
Stellenbosch
9 July 2015
Mediclinic Offices, Strand Road, Stellenbosch 7600, South Africa
PO Box 456, Stellenbosch 7599, South Africa
Tel +27 (0)21 809 6500
Fax +27 (0)21 886 4037
Ethics Line: 0800 005 316
Website: www.mediclinic.com
Financial adviser and JSE sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
NSX sponsor
Simonis Storm Securities (Proprietary) Limited
Reporting Accountants and Auditors
Pricewaterhouse Coopers Inc.
Legal adviser
Cliffe Dekker Hofmeyr Inc.
Date: 09/07/2015 10:27:00 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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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,
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