Wrap Text
Acquisition of assets
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")
ACQUISITION OF ASSETS
1. INTRODUCTION
RH Bophelo is pleased to announce that on 20 November 2017, it entered
into acquisition agreements (including addendums) ("Agreements"), whereby on the fulfilment
or waiver of the conditions precedent in these Agreements, will see RH
Bophelo acquire:
- a 76% equity holding in a newly formed holding company
("VPH HoldCo"). VPH HoldCo will then use these proceeds to capitalise three
Intermediary holding companies (by way of shareholder loans), such
that the intermediary holding companies can acquire the businesses of
three operating entities, being Vryburg Private Hospital Equipment Trust
("VPHET"), Vryburg Private Hospital Property Trust ("VPHPT") and
Vryburg Private Hospital Trust ("VPHT") (the "VPH Acquisition");
and
- a 60% equity holding in Africa Healthcare Proprietary Limited ("AHC")
(the "AHC Acquisition").
The effective date of: (i) the VPH Acquisition will be the date on which
the conditions precedent to the VPH agreements have been fulfilled or
waived (as the case may be); and (ii) the AHC Acquisition will be either the
last business day of the calendar month in which the conditions precedent
are fulfilled or waived (as the case may be) or the last business day of the
immediately succeeding calendar month in which the conditions precedent
are fulfilled or waived (as the case may be) (as determined in accordance
with the relevant AHC agreements).
2. INFORMATION ON VPHET, VPHPT AND VPHT
VPHET, VPHPT and VPHT (collectively "VPH") have been operational
since 1992, serving a catchment area of 250 kilometres around Vryburg
(North West Province) and is an independently owned private hospital.
VPHET owns the hospital equipment, VPHPT owns the hospital property
and VPHT carries out the hospital operations, rents the hospital complex
from VPHPT and rents the hospital equipment from VPHET.
VPH currently has 18 doctors and is licensed for 44 beds, two operating
theatres, one baby delivery room and is designed around one central nursing
station with the following bed configuration:
- Obstetrics: six beds;
- Paediatrics: four beds;
- ICU/ High care: two beds; and
- Adult beds: 32 beds (Surgical beds: eight, General: 24 beds).
The sole beneficiary of each of VPHPT, VPHP and VPHT is the Vryburg
Privaat Hospitaal Eiendoms Beperk, a private company majority owned by
JJDW van der Merwe ("VDM") (86%), with the remaining shareholding
held by AJ Smit, R Khan, GL Strydom, S Ghoor, Y Ghoor, J Penny, the
Molopo Trust and Histochem Lab Proprietary Limited, the resident medical
practitioners in VPH who will be remaining as such post the transaction (the
"Remaining Doctors"). The trustees of VPHET, VPHT and VPHT are
VDM, AJ Smit, R Khan, and GL Strydom.
3. INFORMATION ON AHC
AHC was established in 2014 as a medical facilities operating, management
and services entity. AHC is a majority Black Woman-owned company (equity
held by Dr. MJG Maholwana and SP van Huyssteen) that competes in the
private and public healthcare sectors on a cost leadership and geographical
coverage basis. AHC is a new entrant in the hospital management sector,
however, it is strategically underpinned by management with extensive
hospital operating expertise. The following is relevant to AHC:
- Owns and operates the St Helena Private Hospital, a 131 bed licenced
hospital in Welkom and the Fountain Private Hospital, a 163 bed licenced
hospital in Carletonville;
- Manages a 115 bed private hospital in Nelspruit as well as a managed care
facility in Welkom;
- Medical facilities and services are provided from the St Helena
Private Hospital and the Fountain Private Hospital in Welkom and
Carletonville respectively;
- AHC Pharmacy provides pharmaceutical services to patients and
corporate clients from the aforementioned hospitals;
- AHC Emergency services is a private ambulance service that provides
services in Welkom and Carletonville; and
- AHC Complete Facilities Management provides facility management
services to all other divisions of AHC.
Furthermore, AHC Nursing College, is a wholly-owned subsidiary of AHC
and provides a comprehensive programme of nurse training and education
that ranges from basic qualification to highly qualified nurses. The facility is
located in Carletonville and is an accredited Institution of Higher Learning by
the Department of Higher Education and Training and registered with the
South African Nursing Council. AHC Nursing College boasts a heritage of
over 60 years training high calibre students.
4. RATIONALE FOR THE VPH ACQUISITION AND AHC
ACQUISITION
RH Bophelo's rationale for the VPH Acquisition:
- Aligned with RH Bophelo's investment mandate and presents an
attractive opportunity to both RH Bophelo and its shareholders;
- Opportunity to acquire a 76% equity interest in an operation where
RH Bophelo will be able to leverage its experience to gain operating
efficiencies in a 44 bed hospital;
- The hospital is located in a rural area of South Africa where the next
closest hospital is 150 kilometres away;
- The investment will improve the hospitals quality, capacity and service
offering, and in so doing the residents' ability to access quality healthcare
as set out in RH Bophelo's mandate;
- Combined with the AHC Acquisition, RH Bophelo will be able to extract
efficiencies from the operation, leading to additional cost savings and
earnings growth; and
- RH Bophelo has intimate knowledge of the asset and has completed a
detailed and thorough due diligence.
RH Bophelo's rationale for the AHC Acquisition:
- Aligned with RH Bophelo's investment mandate and presents an
attractive opportunity to both RH Bophelo and its shareholders;
- AHC is one of RH Bophelo's cross-cutting platform and anchor
investments that RH Bophelo will use to address:
- Administration;
- Commissioning; and
- Management of hospital infrastructure assets.
- AHC will also manage, administer and commission hospitals for other
non-RH Bophelo affiliated parties;
- Will leverage its position in AHC to extract efficiencies and synergies
across RH Bophelo's portfolio; and
- RH Bophelo has intimate knowledge of the asset and has completed a
detailed and thorough due diligence.
5. SALIENT TERMS OF THE AGREEMENTS
VPH Acquisition
RH Bophelo will acquire 76% of the equity in VPH HoldCo, for a total
consideration of R24.3 million, which will be paid from existing cash
resources raised on RH Bophelo's listing. VDM will acquire 10% and the
Remaining Doctors 14% of the equity in VPH HoldCo for a consideration
of R3.2 million and R4.5 million respectively. RH Bophelo will advance a
loan to the Remaining Doctors to enable them to subscribe for equity in
VPH HoldCo, which loan will be advanced to the Remaining Doctors at
the South African Prime Rate of Interest plus 4% with a term of 12 months.
VPH HoldCo will then use these proceeds to capitalise three intermediary
holding companies (by way of shareholder loans), such that they can acquire
the businesses of:
- VPHET for R6.0 million in terms of the VPHET Sale of Business
Agreement;
- VPHPT for R25.0 million in terms of the VPHPT Sale of Business
Agreement; and
- VPHT for R1.0 million in terms of the VPHT Sale of Business Agreement.
The hospital operating licence is to be held in a special purpose vehicle company
currently owned by VDM ("Licence Holdco"). VPH HoldCo has entered into a sale of
shares agreement whereby VPH HoldCo will acquire 100% of the shares in
Licence Holdco from VDM for R100.
Warranties and indemnities typical of a transaction of this nature have been
provided for.
AHC Acquisition
RH Bophelo will acquire 60% of the equity in AHC for a total purchase
consideration of R62.5 million as follows:
- R50.0 million in cash, which will be paid from existing cash resources
raised on RH Bophelo's listing and which will be treated as a capital
injection to be used to fund future growth of the business (i.e. not being
paid to existing shareholders); and
- R12.5 million will be paid to the shareholders of AHC and will be
paid in new RH Bophelo listed shares, which shares will be issued at
RH Bophelo's 30-day volume weighted average price ("VWAP").
In addition, the shareholders of AHC will be paid an "agterskot" payment
after 31 March 2019 based on the performance of AHC Nursing College.
The "agterskot" payment will: (i) be paid in new RH Bophelo listed shares,
which shares will be issued at RH Bophelo's 30-day VWAP; and (ii) be equal
to an amount in Rands equal to 60% (sixty percent) of a multiple of 8 times
the earnings before interest, tax, depreciation and amortisation (calculated
in accordance with IFRS) of AHC Nursing College for the financial year
ended 31 March 2019.
Warranties and indemnities typical of a transaction of this nature have been
provided for.
6. CONDITIONS PRECEDENT
The remaining conditions precedent in terms of the VPH Acquisition (including the
Licence Holdco Sale of Shares Agreement), as at the date of this announcement,
to be fulfilled by 28 February 2018, are as follows:
- RH Bophelo shareholder approval;
- Director and Trustee resolutions authorising the VPH Acquisition from
all the entities party to the VPH Acquisition;
- Filing of an amended Memorandum of Incorporation of VPH HoldCo and Licence Holdco
with the Companies and Intellectual Property Commission;
- To the extent required, any and all regulatory consents, approvals and/or
exemptions which are necessary or required for the conclusion and
implementation of the VPH Acquisition being obtained; and
- Each agreement necessary for the implementation of the VPH Acquisition
having being concluded and rendered unconditional on the terms and conditions
to which it is subject.
The remaining conditions precedent in terms of the AHC Acquisition, as
at the date of this announcement, to be fulfilled by 28 February 2018, are
as follows:
- the filing of a new MOI of AHC;
- to the extent required, AHC delivering to RH Bophelo a copy of all
the authorisations, consents, approvals, resolutions and the like required
to be obtained from third parties (whether in terms of any contractual
arrangement to which AHC may be a party to, applicable law or
otherwise) in order to implement the AHC Acquisition;
- to the extent required, RH Bophelo delivers to AHC a copy of all board
and/or shareholders' resolutions approving the subscription by RH Bophelo
for shares in AHC in terms of the JSE Listings Requirements, including as a
Category 1 transaction;
- to the extent required, RH Bophelo delivers to AHC a copy of all
authorisations, consents, approvals, resolutions and the like required to
be obtained from the directors and/or shareholders of RH Bophelo in
connection with the AHC Acquisition; and
- the shareholders of AHC pass resolutions in accordance with
section 41(3) of the Companies Act authorising the issue and allotment of
the subscription shares.
7. FINANCIAL INFORMATION
Per the audited and IFRS compliant financial statements, as at 30 June 2017:
- VPHET, in terms of the Sale of Business Agreement, has assets less
liabilities of R0.8 million and a net profit after tax of R4.3 million;
- VPHPT, in terms of the Sale of Business Agreement, has assets less
liabilities of R23.7 million and a net profit after tax of R1.8 million; and
- VPHT, in terms of the Sale of Business Agreement, has assets less
liabilities of R4.9 million and a net profit after tax of R2.4 million.
On an aggregated basis, VPHET, VPHPT and VPHT have assets less liabilities,
in terms of the Sale of Business Agreements, of R29.4 million and a profit
after tax of R3.7 million. The directors of RH Bophelo have performed a
valuation of the projected future cash flows of the combined entities and
believes that the value of RH Bophelo's 76% shareholding is between
R29.0 million and R31.2 million.
Per the audited and IFRS compliant financial statements, as at 31 March
2017, AHC had a net asset value of R3.1 million and a net profit after tax
of R1.3 million. The directors of RH Bophelo have performed a valuation
of the projected future cash flows of AHC, before the R50.0 million capital
injection, and believes that the value of RH Bophelo's 60% shareholding is
R65.3 million.
8. ADHERENCE TO THE JSE LISTINGS REQUIREMENTS
The memorandum of incorporation of VPH HoldCo, AHC and any group
subsidiaries will not frustrate RH Bophelo in terms of its compliance with
its obligations under the JSE Listings Requirements and the provisions of
paragraph 10.21 of Schedule 10 will be complied with.
9. CATEGORISATION
The VPH Acquisition and AHC Acquisition qualify as Category 1 acquisitions
in terms of the JSE Listings Requirements per a JSE Limited ruling and
requires shareholder approval. A circular, setting out full details of the
VPH Acquisition and AHC Acquisition, will be distributed to RH Bophelo
shareholders in due course, which will include the notice of general meeting.
Post the successful conclusion of the VPH Acquisition and AHC Acquisition,
the JSE will no longer classify RH Bophelo as a SPAC and subject to the
approval of the JSE and the Company's shareholders, the Company will be
re-classified on the Main Board as an investment entity.
Johannesburg
22 November 2017
Corporate Advisors
THIRD WAY
Investment Partners
BRIKET STEWART McHENDRIE
Legal Advisor to the AHC Acquisition
ENS AFRICA
Legal Advisor to the VPH Acquisition
TGR ATTORNEYS
Sponsor
Deloitte
Reporting Accountants
Deloitee
BDO
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