| Mon 6 Dec 2010, 11:40 | | LHG - Litha Healthcare Group Limited - Amendment to and exercise of the option |
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LHG
LHG
LHG - Litha Healthcare Group Limited - Amendment to and exercise of the option
to acquire the remaining 49% of Litha Healthcare Holdings (Proprietary) Limited
("Litha Healthcare") and withdrawal of cautionary announcement
LITHA HEALTHCARE GROUP LIMITED
(formerly known as Myriad Medical Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration Number 2006/006371/06)
Share code: LHG ISIN: ZAE000144671
("Litha Healthcare Group" or the "company")
AMENDMENT TO AND EXERCISE OF THE OPTION TO ACQUIRE THE REMAINING 49% OF LITHA
HEALTHCARE HOLDINGS (PROPRIETARY) LIMITED ("LITHA HEALTHCARE") AND WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT
1 INTRODUCTION
At the time of the acquisition of 51% of the shares in and claims against
Litha Healthcare, Litha Healthcare entered into (and obtained approval
for) put and call options ("the options") with the remaining shareholders
of Litha Healthcare (the "vendors") in respect of the balance of the equity
in Litha Healthcare (the "option equity").
Shareholders are advised that Litha Healthcare Group and the vendors have
amended the terms of the options to allow for their earlier exercise and
Litha Healthcare Group has conditionally exercised the option.
2 RATIONALE
The initial acquisition of a 51% stake in Litha Healthcare diversified the
company`s healthcare offering, strengthened management and significantly
increased the scale of the group.
It was always the intention for Litha Healthcare Group to acquire the
balance of the equity in Litha Healthcare so as to constitute it a wholly
owned subsidiary. The revised option accelerates this intention and results
in the full integration of the group and a complete alignment of interests
between all parties.
3 THE REVISED OPTION
The terms of the options previously provided that:
- the options could be exercised by the vendors at any time during the
period of 60 days after the date of receipt by them of the audited
financial statements of Litha Healthcare for the financial year ended
31 December 2011 and by Litha Healthcare Group at any time during the
period of twelve months calculated from the date of receipt by Litha
Healthcare Group of the audited financial statements of Litha
Healthcare for the financial year ended 31 December 2010;
- if the option was exercised by the vendors, the option equity would be
acquired at a price per share equal to 7.2 times 49% of the average
profit after tax earned by Litha Healthcare for the 12 months ended 31
December 2010 and 31 December 2011 and if the option were to be
exercised by Litha Healthcare Group the price payable in respect of
the option equity would be calculated in the manner as aforesaid
except that the calculation would be based on the average profit after
tax earned by Litha Healthcare for the 12 months ended 31 December
2009 and 31 December 2010;
- the purchase price would be discharged in cash and shares in
proportions to be agreed upon between the vendors and Litha Healthcare
Group failing which 30% of the purchase consideration is to be
discharged by the allotment and issue of Litha Healthcare Group shares
at a price per share equal to the volume weighted average traded price
at which the Litha Healthcare Group shares traded on the JSE Limited
("JSE") for the 30 trading days immediately prior to the exercise of
the option with the balance payable in cash.
Litha Healthcare Group and the vendors have agreed to accelerate the
options and revise the terms (the "revised options") as follows:
- the effective date of the acquisition of the option equity will be 1
January 2011;
- the purchase consideration will be R177 million payable as to R70.8
million in cash (the "cash consideration") and R106.2 million by the
allotment and issue of ordinary shares in the capital of Litha
Healthcare Group at R2.20 per share (the "consideration shares"). The
vendors have agreed that they will not sell, transfer or otherwise
dispose of any the consideration shares for a period of at least 3
years from the date on which the consideration shares are issued to
them;
- the purchase consideration represents 7.2 times the anticipated
annualised profit after tax to be earned by Litha Healthcare for the
year ended 31 December 2010.
The cash consideration is payable by 1 April 2011 and bears interest from 8
January 2011 until the date of payment at the prime rate.
The revised option has been exercised by Litha Healthcare Group. However
both the revision of the options and their exercise remain conditional on
the requisite approval of Litha Healthcare Group shareholding in general
meeting (the "general meeting").
4 FUNDING OF THE CASH CONSIDERATION
Litha Healthcare Group intends financing the cash consideration by way a
placement of shares ("vendor consideration placing"), provided that this
shall not preclude Litha Healthcare Group from, at its election, funding
the cash consideration through debt funding.
Blackstar Group plc ("Blackstar") has agreed to fully underwrite the vendor
consideration placing at R2.20 per share in return for an underwriting fee
of R2 750 000. As part of its underwriting commitment Blackstar has agreed
that, if the company is not in a position to discharge the cash
consideration on 1 April 2011 because it has not yet implemented the vendor
consideration placing, Blackstar will advance a bridging loan to Litha
Healthcare Group to fund the cash consideration.
The bridging loan shall bear interest at the prime rate and is repayable on
the earlier of 31 May 2011 and the date on which the vendor consideration
placing is implemented.
5 RELATED PARTY TRANSACTION
The vendors comprise the Hessel Trust, the Michros Trust, Nkululeko Sowazi,
Wanda Sowazi, Sipho Twala, Sipho Mdleleni, the Mhlongo Trust, Morena
Mokoana, Selwyn Kahanovitz, Martin Kahanovitz, the trustees of the Litha
Executive Share Purchase Scheme and Georgina Motsei Mhlongo. S Kahanovitz,
M Kahanovitz, N Sowazi and M Makhoana (the "related parties") are directors
of Litha Healthcare Group and, in the case of Selwyn Kahanovitz, a material
shareholder of Litha Healthcare Group. In the circumstances the revised
option is a related party transaction in terms of the Listings Requirements
of the JSE.
Accordingly:
- the revised option is subject to the requisite approval of
shareholders of the Litha Healthcare Group other than the related
parties and their associates;
- the board will appoint an independent advisor to prepare a fairness
opinion on the terms of the revised option. The terms of the fairness
opinion will be included in the circular to be posted to shareholders
in due course.
6 IRREVOCABLE UNDERTAKINGS
Blackstar Group (Proprietary) Limited and Visio Capital (Proprietary)
Limited, constituting 72% of Litha Healthcare Group`s shareholders
(excluding those shares held by the vendors), have irrevocably undertaken
at the general meeting to vote in favour of all resolutions required to
approve and implement the revised option.
7 FINANCIAL INFORMATION
The pro forma financial effects of the transaction on Litha Healthcare
Group are set out below.
The pro forma financial effects have not been reported on by the auditors,
are the responsibility of the directors of Litha Healthcare Group and have
been prepared for illustrative purposes only, to provide information on how
the transaction may have impacted on the historical financial results of
Litha Healthcare Group for the 6 months ended 30 June 2010.
The table below reflects the pro forma financial effects of the transaction
on a Litha Healthcare Group shareholder:
Unadjusted Adjusted After % After %
before the , before the Change the Change
transaction the transact transac
(cents) transact ion tion
ion, (Scenari (Scenar
taking o 1) io 2)
into (cents) (cents)
account
full 6
months
of Litha
Healthca
re
(cents)
Basic 7.5 7.6 9.6 28% 9.1 21%
earnings
per
share
(cents)
Headline 9.4 8.9 10.7 14% 10.2 8%
earnings
per
share
(cents)
Net 88.9 88.9 105.5 19% 113.9 28%
asset
value
per
share
(cents)
Net 22.5 22.5 13.6 (40%) 29.3 30%
tangible
asset
value
per
share
(cents)
Weighted 232 681 697 325 717 373 990 390 081
average 768 495 404
number
of
shares
in issue
Number 325 717 768 325 717 373 990 406 172
of 768 495 313
shares
in issue
Notes and assumptions:
1 The pro forma income statement and balance sheet are based on published
unaudited interim financial information of Litha Healthcare Group for the
six months ended 30 June 2010, as released on SENS on 21 September 2010.
2 The "Adjusted before the transaction taking into account full 6 months of
Litha Healthcare" is provided for information purposes and reflects what
the numbers would be had Litha Healthcare been included for the full 6
month period ending 30 June 2010.
3 The "After the transaction (cents)(Scenario 1)" column reflects the
adjustments in respect of the implementation of the transaction assuming
that purchase price will be payable as to:
- R70.8 million in cash settled as to R35 million from existing cash
resources and R35.8 million by the assumption of debt facilities at an
assumed interest rate of 9%; and
- R106.2 million by the allotment and issue of 48 272 727 ordinary
shares in the capital of Litha Healthcare Group at R2.20 per share.
4 Transaction costs have been expensed in respect of the acquisition. These
have been assumed to be non tax deductible.
5 The "After the transaction (cents) (Scenario 2)"column reflects the
adjustments in respect of the implementation of the transaction assuming
that purchase price will be settled by the allotment and issue of 80 454
545 ordinary shares in the capital of Litha Healthcare Group at R2.20 per
share.
6 Transaction costs have been expensed in respect of the acquisition. These
have been assumed to be non tax deductible.
7 The underwriting fee in respect of the additional shares to fund the cash
consideration has been written off to share premium.
8 The pro forma Income Statement figures illustrate the possible financial
effects if the transaction had taken place on 1 January 2010.
9 The pro forma Balance Sheet figures have been based on the assumption that
the transaction had taken place on 30 June 2010.
8 FURTHER DOCUMENTATION AND GENERAL MEETING
A circular containing further details of the transaction, including the
fairness opinion referred to above and a notice convening a general
meeting, will be sent to Litha Healthcare Group shareholders in due course.
9 WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Caution is no longer required to be exercised by Litha Healthcare Group
shareholders when dealing in their securities.
6 December 2010
Sponsor
Java Capital
Underwriter
Blackstar
Date: 06/12/2010 11:40:01 Produced by the JSE SENS Department.
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