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AFROCENTRIC INVESTMENT CORPORATION LIMITED - Acquisition of a further 74% in Activio - related party and withdrawal of cautionary

Release Date: 09/10/2018 08:30
Code(s): ACT     PDF:  
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Acquisition of a further 74% in Activio - related party and withdrawal of cautionary

AFROCENTRIC INVESTMENT CORPORATION LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1988/000570/06)
JSE Code: ACT
ISIN: ZAE000078416
(“AfroCentric” or “the Company”)

ACQUISITION OF A FURTHER 74% INTEREST IN ACTIVO HEALTH PROPRIETARY LIMITED
(“ACTIVO”) BY AFROCENTRIC FROM, INTER ALIA, WAD HOLDINGS PROPRIETARY LIMITED
(“WAD”) AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

1.     INTRODUCTION

AfroCentric shareholders (“Shareholders”) are referred to the Financial Results announcement
published on the Stock Exchange News Service (“SENS”) of the JSE Limited (“JSE”) on 14
September 2018, which announcement included inter alia, a cautionary announcement (“Cautionary
Announcement”) and are advised that on 8 October 2018, AfroCentric via its subsidiary, ACT
Healthcare Assets Proprietary Limited (“AHA”), concluded the commercial terms of an agreement in
terms of which it will, subject to the fulfilment of certain conditions precedent, acquire 74% in Activo,
from WAD and Messrs SE Claassen (“Claassen”) and JPF Martin (“Martin”) (collectively the
“Sellers”), for an aggregate purchase consideration of R588 million, which will be settled by means
of a combination of cash and the issue of AfroCentric ordinary shares (“Acquisition”). Shareholders
will be aware that AfroCentric acquired a 26% interest in Activo and a call option for a further 74%
interest in Activo as a component of the acquisition of the WAD assets in 2015 (“WAD Acquisition”).

2.     RATIONALE AND BACKGROUND TO THE ACQUISITION

AfroCentric is invested in a number of healthcare services segments in both the public and private
healthcare markets in South Africa, with expanding operations and related applications in wholesale
pharmaceutical supply, national chronic medication distribution and disease management, this apart
from its Medical Scheme administration and managed care services division, Medscheme, with its
complementary care coordinating business units/companies.

The acquisition of absolute control of Activo is therefore consistent with AfroCentric’s growth
objectives through expanding its activity and application in its pharmaceutical supply and its
medication distribution network.

3.     TERMS OF THE ACQUISITION

AHA will on the effective date, acquire the remaining 74% of the ordinary shares in and shareholder
loan claims against Activo (the “Sale Equity”) from the Sellers on the terms and conditions set out
below. The Sellers are WAD, a 16% shareholder in and related party to AfroCentric, which holds a
51.6% interest in Activo and Claassen and Martin, who each hold a 11.2% interest in Activo.
3.1     Effective date of the Acquisition

        The effective date of the Acquisition, subject to the timeous fulfilment of the conditions
        precedent detailed in paragraph 3.2 herein, will be 1 January 2019, or such later date as the
        parties may determine (“Effective Date”).

3.2     Conditions precedent

        The Acquisition is subject to the fulfilment or waiver, as the case may be, by or before the
        Effective Date, of the following outstanding conditions precedent:

3.2.1 regulatory approvals of the Acquisition including by, and to the extent that such approval may
      be required, the Competition Commission; and
3.2.2 approval of the Acquisition by AfroCentric Shareholders in general meeting.

3.3     The Sale Equity

        The Sale Equity is 740 ordinary shares in the capital of Activo, representing 74% of its issued
        share capital (“Sale Shares”) and the Sellers’ claims on loan account against Activo, being an
        amount equal to R3.7 million payable to WAD(“Shareholder’s Loan”).


3.4     The Consideration

        An independent valuation of 100% of Activo was commissioned to determine the option price
        range, which was determined according to the formula of the original purchase agreement
        concluded in 2014. The proportionate aggregate purchase price for the Sale Equity is R588
        million which will be settled by AHA as follows:

3.4.1   the amount of R409 622 000 will be payable to WAD, in respect of 51.6% of the Sale Shares
        and the Shareholder’s loan, in cash;

3.4.2   the amount of R89 189 000 will be payable to Claassen, as follows:

        3.4.2.1 fifty percent of the consideration, being R44 594 500, in cash; and
        3.4.2.2 fifty percent of the consideration by the issue to Claassen of such number of ordinary
                AfroCentric Shares (“AfroCentric Shares”) as shall represent R44 594 500 on the
               Effective Date, which shares shall be subject to a restriction on sale for a period of
               three years from the Effective Date.




3.4.3   the amount of R89 189 000 will be payable to Martin as follows:
       3.4.3.1 fifty percent of the consideration, being R44 594 500, in cash; and
       3.4.3.2 fifty percent of the consideration by the issue to Martin of such number of AfroCentric
               Shares as shall represent R44 594 500 on the Effective Date, which shares shall be
               subject to a restriction on sale for a period of three years from the Effective Date.

3.4.4 The cash component of the Consideration will be funded by current cash reserves in the Group
      as well as credit facilities through various subsidiaries.

3.5    Profits and net asset value attributable to Activo

       The after tax profits attributable to Activo for the year ended 30 June 2018, being its most
       recent year end, is R63 million while the net asset value as at 30 June 2018 was R115 million.

3.7    Warranties and indemnities

       AHA and the Sellers have given each other the warranties and indemnities that are usual in
       transactions of this nature.

4.     CATEGORISATION OF THE ACQUISITION

The Acquisition is classified as an agreement with a related party in terms of the Listings
Requirements of the JSE. The Company will appoint a JSE approved independent expert to provide
a fairness opinion on the Acquisition.

The Acquisition is subject to the approval of AfroCentric Shareholders by way of ordinary resolution
passed at a general meeting. The ordinary resolution will be subject to a simple majority of the votes
of AfroCentric Shareholders, other than WAD and its associates (to the extent they hold any shares
in AfroCentric), being cast in favour of the ordinary resolution, as required in terms of the Listings
Requirements of the JSE.

A circular to AfroCentric Shareholders setting out the full terms of the Acquisition and including a
notice of general meeting and the fairness opinion of an independent expert on the Acquisition, will
be posted and will also be made available on the Company’s website at www.AfroCentric.co.za. in
due course.




5.     WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the Cautionary Announcement dated 14 September 2018 and are
advised that having regard to the information in this announcement they no longer need to exercise
caution when dealing in the Company’s securities.

Johannesburg
9 October 2018

Sponsor
Sasfin Capital (a member of the Sasfin Group)

Legal Advisor to AfroCentric
Van Huyssteens Commercial Attorneys

Reporting Accountant
PricewaterhouseCoopers

Date: 09/10/2018 08:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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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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