ADRENNA PROPERTY GROUP LIMITED - Investment into the East Sydney Day Hospital

Release Date: 07/09/2018 17:30
Code(s): ANA
Wrap Text
Investment into the East Sydney Day Hospital

(Registration Number 1998/012245/06)
Share Code: ANA ISIN: ZAE000163580
“Adrenna” or “the Company”


The board of directors of Adrenna is pleased to announce that the Company entered into an
agreement on 5th September 2018 with The East Sydney Day Hospital (Pty) Limited (“ESDH”) in terms
of which it will subscribe for 2 000 000 (two million) convertible, redeemable preference shares to be
issued by ESDH for an amount of A$ 2 000 000 (two million Australian Dollars) with effect from 1st
August 2018 (“the Transaction”).

The preference shares, which are secured by a second ranking security interest over all present and
future assets, undertakings and rights of the ESDH, pay a quarterly dividend of 12% per annum and
are convertible into ordinary shares within 60 (sixty) days of the maturity date of 28 February 2021
(“Maturity Date”) or after another conversion event (being the occurrence of an event of default or
ESDH providing notice in writing to the Company that a trade sale or an initial public offering has
been or is about to be concluded) (“Conversion Event”), but if not converted within 90 (ninety days)
of the Maturity Date, will, together with any accrued dividends, be automatically redeemed by

Overview of Adrenna, Rationale and Benefits of Investment
Adrenna is a property investment company owning income producing properties in South Africa.
Over the years the Company has investigated numerous avenues and opportunities regarding the
development of and investment in property. The Company has now identified the need for a
dedicated Healthcare Property operation in South Africa, mirroring those established in the USA
(more than $15 billion) and in Australia (More than A$ 8 billion).

The ability for Adrenna to develop the relevant necessary expertise in the local market is limited.

The Australian Healthcare system in its current format is similar to the South African system in that it
relies on significant government funding, private and public-sector service delivery and a regulated
health insurance market.

A number of initiatives have been implemented in the Australian context which have allowed for
private sector involvement in the development of modern healthcare services. ESDH has responded
well to this change by investing in and developing a “Non-Hospital” infrastructure which provides
affordable consultation, diagnostic and treatment under one roof without the need for a major
hospital infrastructure. Similar initiatives are yet to be explored within the South African context.

Following the investment, and with the assistance of ESDH which is able to demonstrate a successful
track record in exploiting these initiatives, Adrenna intends to implement similar such initiatives in the
South African market, it being envisioned that the final product will be co-located, supplementary
facilities using existing infrastructure, retaining scarce resources and ensuring significant cross-
subsidised resources.
The board is of the opinion that the ESDH model can, as a result of Adrenna’s investment in and
involvement with the operations of the ESDH, be duplicated throughout South Africa, creating
substantial job opportunities, expertise and a paradigm shift in the South African Healthcare industry
and reducing the financial burden on the proposed National Healthcare Scheme and the fiscus.

In terms of a “Preference Share Subscription Agreement” Adrenna will subscribe for 2 000 000
Convertible Preference Shares of A$ 1 each (“the Preference Shares”) in the capital of ESDH.

Conversion and Redemption
The Company may, within 60 (sixty) days of the Maturity Date or following a Conversion Event issue a
notice (“Conversion Notice”) to ESDH and the preference shares will be converted into ordinary
shares in ESDH 10(ten) business days following the receipt of the Conversion Notice.

On conversion, Adrenna will hold at least 15% (fifteen percent) of the total number of ordinary ESDH
shares in issue immediately following conversion.

Should the Company not issue a Conversion Notice within 60 (sixty) days of the Maturity Date, the
preference shares, together will all accrued dividends, will be automatically redeemed by ESDH.

Rights Accruing to the Preference Shareholder
-     Adrenna has full voting rights at all meetings of ESDH on the basis of the rights which would
      have accrued to Adrenna as if the Preference Shares had been converted immediately prior
      to the meeting; and
-     Whilst a preference share shareholder, Adrenna is entitled to appoint one director to the
      board of ESDH

Financial Information Pertaining to ESDH
Based on the management accounts for ESDH for the year ended 30 June 2017, ESDH had a
negative asset value of A$ 5 941 876 (2016: 2 322 731) and a net operating loss of A$ 3 619 021 (2016:
4 086 318).

Related Party Transaction
Mr Ricky Fertig, a director of and material shareholder in the Company, has a minority shareholding
in and is a director of the ESDH and the Transaction is accordingly considered to be a related party

The Transaction is classified as a Category 1 and a related party transaction in terms of the JSE
Listings Requirements and shareholder approval is accordingly required. A circular, including the
requisite fairness opinion and containing a notice of general meeting will be distributed to
shareholders of the Company in due course.

7 September 2018

Arbor Capital Sponsors Proprietary Limited

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