| Mon 26 Apr 2010, 7:07 | | MVG/MVGP - MVelaphanda Group Limited - The disposal by MVELA Group of a portion |
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MVG MVGP
MVG
MVG/MVGP - MVelaphanda Group Limited - The disposal by MVELA Group of a portion
of its interest in Life Healthcare Group Holdings
MVELAPHANDA GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1995/004153/06)
Ordinary share code: MVG ISIN: ZAE000060737
Preference share code: MVGP ISIN: ZAE000073540
("Mvela Group" or "the Company")
THE DISPOSAL BY MVELA GROUP OF A PORTION OF ITS INTEREST IN LIFE HEALTHCARE
GROUP HOLDINGS (PROPRIETARY) LIMITED ("LIFE HEALTHCARE"), IMPLEMENTED THROUGH A
SHARE REPURCHASE BY LIFE HEALTHCARE AND A SALE OF SHARES AS PART OF THE INITIAL
PUBLIC OFFERING OF LIFE HEALTHCARE ("LIFE HEALTHCARE IPO") AND FURTHER
CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Mvela Group ordinary shareholders ("Shareholders") are referred to the:
- cautionary announcement by Mvela Group released on SENS on 8 March 2010
advising that the existing shareholders of Life Healthcare ("Existing Life
Healthcare Shareholders") had chosen to pursue a listing of Life Healthcare; and
- further press announcement released today by Life Healthcare, in which the
directors of Life Healthcare announced their intention to list the ordinary
shares of Life Healthcare on the securities exchange operated by the JSE Limited
(the "JSE") by 30 June 2010 (the "Life Healthcare Listing").
Pursuant to the Life Healthcare Listing, Life Healthcare intends issuing new
Life Healthcare ordinary shares ("New Life Healthcare Shares") equivalent to a
minimum of 30% of its existing shares to new investors who will participate in
the Life Healthcare Listing. As Life Healthcare does not require additional
capital through the Life Healthcare Listing, the proceeds received from the Life
Healthcare Listing will, subject to signature of final agreements between Life
Healthcare and the Existing Life Healthcare Shareholders, be utilised to
repurchase the same number of Life Healthcare ordinary shares as was issued in
terms of the Life Healthcare Listing, from Existing Life Healthcare
Shareholders, including Mvela Group (the "Life Healthcare Repurchase").
Mvela Group owns an effective 21.65% of Life Healthcare; 4.25% of this interest
is held through its wholly-owned subsidiary, Mvelaphanda Strategic Investments
(Proprietary) Limited ("MSI") (referred to as the "MSI Life Healthcare
Interest") and the balance of 17.40% is indirectly held through Business Venture
Investments No 813 (Proprietary) Limited ("BVI 813") (referred to as the "BVI
813 Life Healthcare Interest").
Mvela Group intends to dispose of up to 100% of its MSI Life Healthcare
Interest, of which a minimum of 30% will be disposed of through the Life
Healthcare Repurchase and the remaining interest disposed of directly to new
investors, as part of the Life Healthcare IPO (the "MSI Disposal"). In addition,
depending on the Life Healthcare IPO, an effective c.1.90% of the BVI 813 Life
Healthcare Interest will be disposed of through the Life Healthcare Repurchase
and various ancillary transactions (the "BVI 813 Disposal"). Following the MSI
Disposal and the BVI 813 Disposal (collectively referred to as the "Disposal"),
Mvela Group will own approximately an effective 16% interest in Life Healthcare
(the "Residual Interest"). The Disposal will not result in a Category 1
transaction in terms of the JSE Listings Requirements.
The purpose of this announcement is to provide Shareholders with information
relating to the Disposal and its effect on the Company.
2. BACKGROUND ON MVELA GROUP
Mvela Group is one of South Africa`s leading broad-based, black-controlled,
owned and managed diversified industrial groups, with interests in a portfolio
of companies operating in the financial services, healthcare and general
industrial sectors.
Mvela Group`s investments include:
- an effective 21.65% interest in Life Healthcare;
- an effective 44.7% interest in Batho Bonke Capital (Proprietary) Limited,
which owns ordinary shares with an effective 5.01% interest in ABSA Group
Limited. As a result, Mvela Group holds an effective 2.23% interest in ABSA
Group Limited;
- an effective 11.27% interest in Group Five Limited;
- a 12.4% shareholding in Vox Telecom Limited; and
- a 100% interest in Mvelaserve Limited, a diversified services group which
provides facilities management, professional services, food services and support
services to a wide range of businesses and sectors across the country.
3. OVERVIEW OF LIFE HEALTHCARE
Life Healthcare is a leading private hospital operator in the South African
Healthcare sector with more than 25 years` experience in operating private
hospitals and with 27% of the private hospital bed market. The primary business
is acute private hospital care with 62 acute care facilities and over 8,100
beds. In addition, Life Healthcare is a leading provider of contracted on-site
occupational and primary healthcare services. Life Healthcare also owns Life
Esidimeni, which is South Africa`s largest hospital public private partnership
with 12 facilities and over 4,100 beds.
Life Healthcare is committed to delivering high quality healthcare across all
facilities and services with a strong focus on patient satisfaction. Life
Healthcare`s status as a preferred hospital provider to medical schemes and
employer of choice has allowed Life Healthcare to recruit and retain doctors and
key clinical personnel.
Life Healthcare`s strategy is to provide world-class, cost-effective healthcare
in South Africa and other emerging markets. Life Healthcare plans to expand its
coverage and penetration in South Africa as well as strengthen its partnerships
with Government whilst engaging in healthcare reform. Life Healthcare will look
to leverage its successful business model in select emerging markets to enable
further growth.
Significant opportunities exist in the South African healthcare market with
further growth of the private healthcare market expected as new low cost options
become available covering a wider section of the employed population.
4. RATIONALE FOR THE DISPOSAL
Pursuant to the Company`s previous announcements on its plans to realise and/or
unbundle its interest in Life Healthcare; Mvela Group believes that the Life
Healthcare Listing, followed ultimately by the unbundling of the Residual
Interest in Life Healthcare to Shareholders (the "Unbundling"), is in the best
interests of Shareholders.
The Disposal will facilitate:
- the meeting of the free-float requirement for Life Healthcare pursuant to the
Life Healthcare Listing;
- the settlement of the preference share obligations of Newshelf 776
(Proprietary) Limited ("Newshelf 776"), a subsidiary of MSI; and
- the simplification of Mvela Group`s holding structure in Life Healthcare,
which will assist with the implementation of the Unbundling.
5. SALIENT TERMS OF THE DISPOSAL
5.1 The Life Healthcare Listing and bookbuild process
Pursuant to the Life Healthcare Listing, it is proposed that the duly appointed
joint bookrunners of Life Healthcare undertake a bookbuild process with the
objective of setting the price at which the Life Healthcare ordinary shares will
list.
The key features of the bookbuild process are set out below:
- the bookbuild process will be undertaken with local and international
institutional investors and will be based on an indicative price range;
- the price range published in Life Healthcare`s prospectus will serve as a
guide only and the final price may be higher or lower than the indicative price
range;
- the bookbuild process will take place over a number of days. This will allow
for sufficient time for potential investors to perform an analysis of the Life
Healthcare IPO;
- all potential investors will have the same information available to them in
order to make their investment decision;
- following the bookbuild process, the joint bookrunners together with the Life
Healthcare board and management and the Existing Life Healthcare Shareholders
will determine an appropriate price at which Life Healthcare will list (the
"Bookbuild Price"), taking into account their view of fundamental value, the
market demand, feedback from the bookbuild process and Life Healthcare`s
historical and expected results of operations; and
- it is proposed that the commencement of the Life Healthcare Listing, the issue
of the New Life Healthcare Shares at the Bookbuild Price and the Life Healthcare
Repurchase will take place before 30 June 2010 (but for the avoidance of doubt,
on the same day).
5.2 The Disposal
Pursuant to the Life Healthcare Listing and in order to facilitate the optimal
structure prior to the Unbundling, Mvela Group will, subject to signature of
final agreements between Life Healthcare and the Existing Life Healthcare
Shareholders, dispose of an expected c.6% of its interest in Life Healthcare.
Given that the Bookbuild Price will only be determined on completion of the
bookbuild process, the proceeds to be received by Mvela Group on the Disposal
remain uncertain at this stage. The directors of Mvela Group ("Mvela Group
Directors") will, in the interest of Shareholders, only implement the Disposal
if the price offered by Life Healthcare in terms of the Life Healthcare
Repurchase (the "Repurchase Price") meets the Mvela Group Directors`
expectations of fair value. The Repurchase Price will be based on the Bookbuild
Price (including downward adjustments for secondary tax on companies ("STC") and
securityies transfer tax) per Life Healthcare ordinary share sold.
The diagram that depicts the structure of Mvela Group`s current shareholding in
Life Healthcare is available in the version of this announcement that appears on
Mvela Group`s website, www.mvelagroup.co.za.
The Disposal is intended to be implemented via a series of inter-conditional
steps outlined below:
- MSI and BVI 813 will each dispose of 30% of their stakes in Life Healthcare
through the Life Healthcare Repurchase. MSI will receive a cash consideration
per Life Healthcare ordinary share equal to the Repurchase Price and BVI 813
will receive a cash consideration per Life Healthcare ordinary share equal to
the Repurchase Price plus any amount payable by Life Healthcare to Ammed
Management Trust ("Ammed Trust") indemnifying Ammed Trust from certain costs
(the "Ammed Indemnity Amount"). The resultant shareholding of MSI and BVI 813,
subsequent to the Life Healthcare Repurchase, will be 2.98% and 28.15%,
respectively;
- up to 100% of the remaining MSI Life Healthcare Interest will be disposed of
at the Bookbuild Price as part of the Life Healthcare IPO;
- to the extent that fair value is achieved, BVI 813 will repurchase at least
90% (or, by agreement, a lesser percentage) ("Ammed Buyback Percentage") of
Ammed Trust`s and 100% of Newshelf 779 (Proprietary) Limited`s ("Newshelf 779")
shares in BVI 813. Ammed Trust will receive a cash consideration per BVI 813
ordinary share equal to the Repurchase Price plus an amount equal to the Ammed
Indemnity Amount multiplied by the Ammed Buyback Percentage and Newshelf 779
will receive a cash consideration per BVI 813 ordinary share equal to the
Repurchase Price. It is the intention and preference of BVI 813 to repurchase
Ammed Trust`s entire shareholding in BVI 813;
- the remaining cash in BVI 813, post the repurchase of its shares from Ammed
Trust and Newshelf 779, will be distributed up to its shareholders, including
BVI 931;
-BVI 931 will distribute a dividend of R180 million to each of its 50%
shareholders, Newshelf 776 and Newshelf 778 (Proprietary) Limited ("Newshelf
778") (the "Limited Cash Distribution"). Mvela Group owns 100% of Newshelf 776
indirectly through MSI, and Brimstone Investment Corporation Limited
("Brimstone") owns 100% of Newshelf 778 and Newshelf 831 (Proprietary) Limited
("Newshelf 831"); and
- BVI 931 will utilise the balance of the cash remaining in BVI 931 after the
Limited Cash Distribution to institute a specific repurchase from Newshelf 778
("Newshelf 778 Repurchase"). The number of shares to be repurchased in terms of
the Newshelf 778 Repurchase will be governed by a formula set out in terms of
the Newshelf 778 Repurchase agreement. On the assumption that the Bookbuild
Price is equal to the carrying value of Mvela Group`s investment in Life
Healthcare as per the financial results as at 31 December 2009, being R2.581
billion, c.10% of BVI 931`s ordinary shares in issue will be repurchased in
terms of the Newshelf 778 Repurchase agreement.
Subsequent to the transaction steps outlined above, Mvela Group will hold an
expected c.16% indirect interest in Life Healthcare through BVI 813.
The diagram that reflects the resultant shareholding structure post the
implementation of the transaction steps is available in the version of this
announcement that appears on Mvela Group`s website, www.mvelagroup.co.za.
5.3 Proceeds from the Disposal
The proceeds received from the Disposal, effected in accordance with the
transaction steps above, will ultimately be distributed to Mvela Group. Mvela
Group will in turn, utilise the proceeds to redeem the Industrial Development
Corporation of South Africa Limited`s ("IDC") preference shares in Newshelf 776,
as well as other outstanding debt obligations.
5.4 Warranties
The agreement between MSI, BVI 813 and Life Healthcare governing the Disposal
will contain warranties that are normal for a transaction of this nature.
5.5 Conditions precedent to the Disposal
The Disposal is subject to the following conditions precedent:
- Life Healthcare lists on the JSE and issues the New Life Healthcare Shares;
- a special resolution of Life Healthcare Shareholders authorising the specific
repurchase of Life Healthcare ordinary shares is passed and registered;
- the Life Healthcare board of directors makes a written declaration that the
implementation of the Life Healthcare Repurchase will not result in Life
Healthcare being in breach of the liquidity and solvency requirements set out in
section 85(4) of the Companies Act, 1973;
- any required approvals of the Existing Life Healthcare Shareholders to the
Life Healthcare Repurchase are obtained; and
- any required Brimstone shareholder approval is obtained.
6. FINANCIAL EFFECTS
Pro forma financial effects of the Disposal
The table below sets out the unaudited pro forma financial effects of the
Disposal on Mvela Group`s unaudited earnings per ordinary share ("EPS"),
headline earnings per ordinary share ("HEPS"), fully diluted earnings per
ordinary share and fully diluted headline earnings per ordinary share for the
six months ended 31 December 2009, as well as Mvela Group`s net asset value
("NAV") per ordinary share and net tangible asset value ("NTAV") per ordinary
share at 31 December 2009. These pro forma financial effects have been prepared
for illustrative purposes only and, because of their nature, may not fairly
present Mvela Group`s financial position, changes in equity, and results of
operations or cash flows. The pro forma financial information is the
responsibility of the Mvela Group Directors.
Before Pro forma after
the the
Disposal Disposal(cents)
(cents)
Change
(%)
Earnings per 117.3 108.9 (7.18)
ordinary share
Diluted earnings per 105.9 (6.96)
ordinary share 98.5
Headline earnings 124.9 113.7 (9.02)
per ordinary share
Diluted headline 112.5 102.6 (8.76)
earnings per
ordinary share
Net asset value per 929.1 930.6 0.16
ordinary share
Net tangible asset 742.7 744.2 0.20
value per ordinary
share
Number of ordinary 407 139 407 139 -
shares in issue
(`000)
Weighted number of 406 792 406 792 -
ordinary shares
(`000)
Notes and assumptions:
1. The unaudited financial information has been extracted from the unaudited
interim results of Mvela Group for the six months ended 31 December 2009.
2. The pro forma adjustments to the income statement have been calculated on the
assumption that the proceeds and related transaction costs from the Disposal,
were, respectively received and paid on 1 July 2009.
3. The pro forma adjustments to the balance sheet have been calculated on the
assumption that the proceeds and related transaction costs were, respectively,
received and paid on 31 December 2009.
4. The fair value of Mvela Group`s investment in Life Healthcare as at 1 July
2009, being R2.254 billion was used to determine the proceeds received from the
Disposal for purposes of calculating the EPS and HEPS per share pro forma
adjustments.
5. The fair value of Mvela Group`s investment in Life Healthcare as at 31
December 2009, being R2.581 billion was used to determine the proceeds received
on the Disposal for purposes of calculating the NAV and NTAV per share pro forma
adjustments.
6. The proceeds received by Mvela Group on the Disposal are net of STC at 10%.
7. Deferred capital gains tax previously reflected on the fair value calculation
of the investment in Life Healthcare relating to the Disposal has been reversed.
8. Dividends received on Life Healthcare shares disposed of have been deducted
from previously reported earnings.
9. The fair value adjustment on the Life Healthcare shares disposed of for the
six-month period ended 31 December 2009 has been reversed.
10. It is assumed that the proceeds (net of transaction costs) would be utilised
to settle the Life Healthcare investment related debt to the IDC and the balance
invested in a money market instrument earning interest at 6.5% p.a.
11. Transaction costs have been expensed to the income statement.
The final pro forma financial effects will be announced after the Life
Healthcare Listing.
7. THE UNBUNDLING
Subsequent to the successful Life Healthcare Listing and the implementation of
the Disposal, Mvela Group and Brimstone intend to undertake a series of internal
restructurings that will culminate in the unbundling of Mvela Group`s and
Brimstone`s remaining interest in Life Healthcare to Mvela Group and Brimstone
shareholders.
Shareholders will receive further information with regards to the Unbundling,
and will be asked for their approval, in a circular to be posted to Shareholders
in due course ("the Unbundling circular").
8. FURTHER ANNOUNCEMENTS
Further details of the Life Healthcare Listing and the Unbundling will be made
available by way of releases on SENS and published in the South African press,
and by way of the Unbundling circular.
9. FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are advised to continue to exercise caution when dealing in Mvela
Group shares until a further announcement is made.
Johannesburg
23 April 2010
Merchant bank, structuring and transaction adviser
RAND MERCHANT BANK (A division of FirstRand Limited)
Sponsor
Deutsche Securities (SA) (Proprietary) Limited
Reporting Accountants
PKF (Jhb) Inc.
Attorneys
Bowman Gilfillan Attorneys
Advisers to Mvela Group
Afropulse Group (Proprietary) Limited
Financial PR advisors
College Hill
Date: 26/04/2010 07:07:05 Produced by the JSE SENS Department.
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