| Fri 2 May 2003, 17:58 | | Moulded Medical Supplies Limited - Restructuring, |
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Moulded Medical Supplies Limited - Restructuring, Change Of Name, Acquisition Of
Additional Assets And Appointment Of New Directors
Moulded Medical Supplies Limited
(Registration number 1995/003771/06)
("Mouldmed" or "the company")
(JSE Code: MUM ISIN Code: ZAE0000013751)
RESTRUCTURING, CHANGE OF NAME, ACQUISITION OF ADDITIONAL ASSETS AND APPOINTMENT
OF NEW DIRECTORS
1. INTRODUCTION
Since its listing in the Venture Capital sector of the JSE Securities Exchange
SA ("JSE") in 1997 Mouldmed was involved in the development, manufacturing and
distribution of specialized medical equipment. The long period of development
and the high costs involved led the board of directors to consider the
restructuring of the company, subsidiaries and associates ("the group"),
including the following:
1.1 A new management team;
1.2 A change of focus to that of a provider of financial and medical
services;
1.3 The transfer of a controlling interest in certain subsidiaries;
1.4 The acquisition of various new assets;
1.5 An increase in the authorised and issued capital;
1.6 A change of name; and
1.7 The reconstitution of the board of directors.
2. MANAGEMENT
The group has appointed Frans Jacobus Benade`(ex Murray & Roberts) as chief
executive officer with effect from 1 April 2003.
He will play a major role in formalising the new strategy for the group as an
innovative, self driven entrepeneur with extensive experience in business and
lots of vision.
3. CHANGE OF FOCUS
Due to the restructuring and acquisitions the group will become a financial and
medical services company with effect from 1 March 2003. Mouldmed will have a
controlling interest in a medical scheme based on a radically new concept, as
well as an effective interest in a niche player in the short term insurance and
medical markets, and in a group of wellness centres. At the same time it greatly
expands its locum interests.
Although it retains an influential stake in its medical products subsidiaries,
effective control thereof is transferred to the management of such companies and
to black economic empowerment ("BEE") investors who are capable of providing
additional capital.
4. TRANSFER OF ASSETS AND RATIONALE
In line with its change in focus Mouldmed will transfer its medical product
interests to a new entity named Moulded Medical Products Limited (or such other
similar name that the Registrar of Companies will allow) ("Mouldprod").
4.1 Assets transferred
The interests transferred to Mouldprod consist of:
97 % of Prostaflo Limited;
97 % of Mouldmed Healthcare Limited;
100 % of Mouldmed Health Foods Limited;
100 % of Mouldmed Pharmaceuticals Limited; and
97 % of Bioscan Africa Holdings Limited.
(Minor shareholders in Prostaflo, Healthcare and Bioscan, mostly management,
have preferred to retain their shares).
As consideration Mouldmed will receive 49 % of the issued shares in Mouldprod,
but without any further management or financing obligations. The controlling
interest will be jointly held by management and a major black empowerment group
in terms of the government"s BEE policy.
4.2 The sole reason for the transfer and the dilution of Mouldmed"s interest is
to be released from the intensive capital requirements for further development
and distribution of the medical products developed to date.
The financial effects are provided in paragraph 11 below.
5. ACQUISITIONS
5.1 The acquisition of 30 % of Alternative Risk Management Solutions Limited
("ARMS").
Agreement has been reached with Dr ME Wakeham and messrs BF Black, KM Robb
and D Davis to purchase from them 30 % of the total issued shares in ARMS,
effective from 1 March 2003.
The acquisition of the ARMS interest will add a new dimension to the business of
Mouldmed. The company was offered only an interest of 30% since the ARMS
management would prefer to retain their independence. The 30% is a strategic
interest and should be enough to unlock various synergies.
ARMS is a holding company establishing special purpose vehicles to underwrite
financial services products such as short term insurance, life assurance and
medicare programmes.
ARMS creates unique products, promoting product usage, creating brand loyalty,
maximising market share and sustaining an increased level of profits for the
ultimate benefit of all the stakeholders associated with the company. ARMS is
focused on providing service excellence to its customers who are represented by
real estate professionals, corporations, educational institutions,
intermediaries and the consumer at large.
ARMS has been operational for a period of fourteen months. It is managed by
real estate, insurance and marketing professionals with many years experience in
their respective fields of expertise. The company has built up valuable
strategic alliances with a number of important players, the most important of
which are Guardrisk, Mutual & Federal, Old Mutual, Gerling Global, Munich
Reinsurance, RGA and the internationally renowned Alliance Group.
ARMS controls the following special purpose vehicles (all subsidiaries except
Finvesco which is an associate):
1. Pluscor 24 (Pty) Limited, which has been set up to create, administer
and market healthcare products such as the EduMed Identification System, the
EduMed Product range, and PlusMed.
2. Finvesco Close Corporation, which acts as ARMS"s financial services
arm and to market ARMS"s unique Guardian Child Maintenance programme. It has
also been developed to entertain special projects such as those for Toyota and
Rolab.
3. ABRES (Pty) Limited ("ABRES"), which was established to servive the
needs of the real estate industry with products such as RentEnsure, LevyEnsure,
TenantEnsure, PropEnsure, BondEnsure, TimeSure and TimeMaster programmes. The
products of ABRES are presently used under licence by Trafalgar, the countries
largest residential and sectional title management company.
4. International Risk Solutions (Pty) Ltd ("IRS") houses products, which
utilise a life cell captive such as BondSure. IRS owns a life cell captive and
an underwriting management agreement with Momentum Ability, a division of the
First Rand Group. This gives the products and product design a preferred status
amongst the First rand member companies such as Rand Merchant Bank, First
National Bank, Discovery Health, Momentum Life, Outsurance and Wesbank. BondSure
is endorsed by ABSA Brokers and is presently under consideration for endorsement
by other banks. Three of the top four bond origination companies have included
BondSure in their product range.
5. Risk Management Logique Ltd. ("Logique") ARMS has entered into a
50/50 joint venture with FutureLAW, which has set up the first ever cell captive
with Santam Insurance, South Africa`s largest short term insurer. ARMS will
therefore have an opportunity to offer Brick and Mortar insurance to some of the
property administrators who administer billions of rands of property. This joint
venture operates under the company name of Logigue and includes the product
range of RentMaster, TenantMaster, LevyMaster and TimeMaster.
Because of the unique and unusual nature of ARMS"s offerings, ARMS is a
market leader in the industries it is associated with; an innovator rather than
a follower. It has a flat organisational structure and is led rather than
managed by its directors.
ARMS has 1 000 issued shares with a net asset value of R4 000 per share.
The net profit before tax for the financial year ending on 28 February 2003 was
R45 000.
5.2 The acquisition of 30% of Zest Interactive Limited ("Zest")
The interest was acquired directly from Zest by the issue of new
shares.
Zest"s vision is to provide the most affordable health maintenance system and
service in South Africa by establishing a countrywide infra structure of Zest
Wellness Centres. This incorporates a pro-active, preventative approach to
health and wellness instead of the general reactive approach. The following are
key elements:
5.2.1 Zest Wellness Centres manage and own medical practices, with the
primary objective to apply preventative medical applications. The most advanced
medical diagnostic apparatus and the best treatment equipment will be installed
at these wellness centres. The relevant medical authorities certified all the
medical equipment being used by these practices.
5.2.2 Zest Equity manages all leased and owned properties.
5.2.3 Zest Intellect manages and controls all trademarks, intellectual
property and licences.
5.2.4 Preventative health management practised by Zest"s own in-house
medical doctors and staff, coupled with ongoing education and seminars to
members and dependants, will create a new concept of health and well-being
amongst participants. The in-house medical doctors employed by Zest will be
thoroughly trained to educate members to adopt the wellness concept.
5.2.5 The concept of management, equipment and principles in Zest"s
operational procedures, is to bring together various standardised approved
medical practices under one roof. The capital investment per centre of more than
R2 500 000 will provide Zest with a very competitive edge over the standard
doctor"s practice. These investments will enable a Zest medical practice to
perform diagnosis, treatment, doctors guidance, prescription and the supply of
medicine under one roof.
5.2.6 Member recruitment has been outsourced to the marketing and promotions
company Sales Dynamix International ("SDI") to market the memberships for the
wellness centres. SDI employs a unique and innovative concept, which will ensure
maximum membership per wellness centre fast and efficiently. The benefit to
participating members will be that active participants will incur favourable
cash flows within a relatively short time. This income could exceed their
monthly premiums to provide additional revenue streams to their respective
households.
Zest started its operations in September 2002 and has no profit history.
The present net asset value of the 500 000 000 issued shares (of which Mouldmed
acquired 150 000 000) is 1.6 cents. Zest will operate as a separate group and
the interest was acquired to unlock specific synergies.
5.3 The acquisition of 60% Capmed Holdings Limited ("Capmed")
The interest was acquired from the Pieter J Neethling Family Trust,
Martiens Bester and Maxibrokers Ltd.
The medical care industry in South Africa is experiencing one of the
biggest crises since its inception. This is due to increasing medical expenses,
decreasing patient benefits and service providers having to spend excessive time
acting as debt collectors.
Changes within the medical care sector, a R50 billion industry, are
creating new challenges and opportunities for health care service companies as
they strive to continue generating profits and shareholder returns and at the
same time provide acceptable services to their members.
Over the past decade contributions to medical schemes have become
unaffordable. The healthy and young have opted out of many medical schemes. In
addition many "fee for service" medical schemes are under financial strain due
to un-defined risks.
The management of Capmed believe that the alternative to the current
scenario is to introduce a "capitation" scheme and anticipate that this industry
will experience vigorous growth over the next five years and have a major impact
on the market.
Capmed is a public company and was created to fill the void in the market
and the basis of the model developed is to share the risk with all the role
players in the industry (members, service providers, and the scheme) thereby
making it affordable for members yet profitable for service providers through a
process of "fixed cost".
Capmed`s long term goal is clearly to become the preferred medical scheme
administrators in South Africa as the "capitation" medical plan is a unique
concept in medical administration which eliminates fraud, controls cost,
provides excellent benefits at the best price, and will protect its members,
service providers and shareholders.
Just over 2.7 million families in South Africa are members of a medical
scheme, according to the Medical Scheme Council report of 2001. Capmed`s
research indicates that members under "medical service stress" are those in the
R7500 to R15000 per month net househould income group. Approximately 60% of
those families will be within Capmed`s target market.
Management believes that Capmed will be able to move 1% to its capitation
model, (25 000 members - families) on board within the first year.
Capmed started its operations in November 2002. As such it has no profit
history. The present net asset value of the 909 000 000 issued shares is 0.91
cents per share of which 0.82 is represented by goodwill.
5.4 The acquisition of 100% of Rejuvenesce Expressions (Pty) Limited
("Rejuvenesce")
Rejuvenance has to date operated as a partnership between the managers
who have spent R1 000 000 on development. The business made a profit of R1 800
during the financial year ending on 28 February 2003. The interest was acquired
from present partners of M Hartman and E Janssen.
Rejuvenesce sources medi-tourists from the United Kingdom, Europe and the
USA to undergo vanity and non-life threatening medical procedures away from home
and to turn their recuperation time into a rejuvenating vacation. They benefit
not only from the current favourable exchange rates, but their rejuvenation
encompasses body and soul! Even middle class travellers are able to stay in five
star luxury and comfort, have procedures done in total privacy and experience
South Africa`s many attractions.
Customised travel packages are put together for the medical tourist, the
facilitation of the medical aspect together with the surgeon concerned, travel
and accommodation arrangements, leisure activities and sightseeing. The emphasis
is on the privacy and comfort of the medical tourist, catering for their every
need in a personalised manner, all within their budget offering total value for
money.
6. RATIONALE FOR THE ACQUISITIONS
The scope of Mouldmed as a financial and medical services provider will be
greatly enhanced by new technology acquired and by the synergies between
Mouldmed, Arms, Zest, Capmed and Rejuvenesce following the acquisition and can
be exploited to the benefit of all stakeholders involved.
The above acquisitions form the support base for cross - servicing between
medical IT, medical insurance and medical service providers, as well as with
other areas of core medical activities.
The acquisitions will all provide quick cash flows for relatively low
investments and this together with the fact that Mouldmed has transferred the
capital intensive product development arm to Mouldprod, should lead to early
profits and dividend payments.
7. PURCHASE CONSIDERATION
7.1 ARMS
The total purchase consideration payable in terms of the acquisition agreement
amounts to R10 000 000 payable by way of the issue to or on behalf of the
vendors of 80 000 000 new ordinary shares of no par value in Mouldmed issued at
ten (10) cents per share ("the share consideration") and the payment of R2 000
000 in cash ("the cash consideration"). Against the share consideration,
Mouldmed will receive 24% of the shares in ARMS. The cash consideration will be
paid in 10 monthly instalments of R200 000 each with a final payment of R200 000
on the 28 February 2004. Mouldmed receives 0,6% of ARMS against the payment of
each instalment.
7.2 ZEST
The interest shall consist of 150 000 000 ordinary shares of no par value in
Zest amounting at all times to 30% of the issued capital of Zest.
The consideration payable for the interest acquired by Mouldmed shall be
R2 000 000. As payment Mouldmed shall issue to or on behalf of Zest 20 000 000
new ordinary Mouldmed shares of no par value each with such shares being issued
at ten (10) cents per share.
The issue of the vendor shares as consideration is based on a warranty that Zest
will earn as profit before tax during the financial year ending on 28 February
2005 an amount of not less than R8 000 000, subject to a pro rata reduction in
the number of Mouldmed shares issued as consideration to the extent that Zest
fails to earn such profit.
7.3 CAPMED
Mouldmed purchased 546 000 000 ordinary shares of no par value in Capmed and
such shares amount to 60% of the issued shares in Capmed.
The consideration payable for the interest acquired by Mouldmed shall be
R27 300 000. As payment Mouldmed shall issue a total of 123 000 000 ordinary
shares of no par value each with such shares being issued at ten (10) cents per
share. The balance of the purchase price will be settled by Mouldmed arranging
the medical scheme licence on behalf of Capmed.
7.4 REJUVENESCE
The consideration payable for the interest (acquired by a subsidiary of Mouldmed
viz Mouldmed Locum Exchange International Limited or "Locum") shall be R150 000.
As payment Locum shall issue a total of 75 000 000 ordinary shares of no par
value in Locum each with such shares being issued at 0.2 cents per share.
8. CHANGE OF NAME AND INCREASE IN CAPITAL
The company intends to change its name to ZEST FINANCIAL AND MEDICAL
INTERNATIONAL LTD, subject to the approval by the Registrar of Companies, the
JSE Securities Exchange SA ("the JSE") and shareholders.
At the same time the company will increase it"s number of authorised shares
with no par value to at least 400 000 000 to accommodate the consideration
shares referred to above.
9. CHANGE OF CONTROL
No person associated with the control of Mouldmed (if any) has an interest in
any of the acquisitions.
Since the vendors of the various assets include a large number of individuals
and institutions with no shareholder holding more than 15 % of the issued shares
in the restructured group and with no related parties or parties acting in
concert there will, effectively, be no change of control.
10. OTHER CONDITIONS IN RESPECT OF THE ACQUISITION
The restructuring and the acquisitions are, inter alia, subject to the
fulfilling of the following suspensive conditions before or on 31 July 2003:
10.1 approval by the JSE and Securities Regulation Panel; and
10.2 approval by shareholders of Mouldmed at a general meeting.
11. FINANCIAL EFFECTS OF THE ACQUISITION
The financial effects are summarised below, are based on the assumption
that the various transactions have been effective from 1 March 2002:
Before After % Change After % Change
Sale Acqui-
sition
Net asset value 11.6 12.3 0.6% 16.1 30.9%
per share (cents)
Net tangible asset 4.6 3.0 (34.8%) 4.2 40%
value per share
(cents)
Earnings per share 1.9 0.7 (63.1%) 0.7 NIL
(cents)
Headline earnings (1.1) (0.2) 81.8% (0.2) NIL
per share (cents)
Number of shares 96 259 96 259 - 319 259 -
in issue (`000)
Principal assumptions:
1. The position "before the acquisition" is based on the un-audited
results of Mouldmed for the six months ended 31 August 2002.
The position "after the acquisition" includes the consideration shares at 10
cents per share. Goodwill is based on the excess of the cost of the acquisition
over the fair value of the net assets and liabilities at the date of the
acquisition.
DIRECTORS
The board of directors of Mouldmed will be reconstituted as follows:
Dr Sarie Brits (Chairman);
F J Benade (C E O);
D Davis;
Dr Pieter J Neethling
Gerrit A Theron; and
Dr Myles Wakeham
BLACK ECONOMIC EMPOWERMENT ("BEE")
The company supports the BEE policy of the government. It is therefore
negotiating with a major empowerment group to acquire up to 25% of the
reconstituted Mouldmed. If successful the BEE group will appoint two directors
to the board. Shareholders are required to exercise caution until a furter
announcement is made.
14. CIRCULAR
A detailed circular will be sent to shareholders in due course.
Cape Town
3 May 2003
Sponsor
Exchange Sponsors (Pty) Limited
