| Tue 30 Nov 2004, 15:21 | | MEDI-CLINIC AND BIDCO MEDIA STATEMENT |
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MEDI-CLINIC AND BIDCO MEDIA STATEMENT FOR IMMEDIATE RELEASE
30 NOVEMBER 2004
MEDI-CLINIC ENABLES IMPLEMENTATION OF THE LARGEST EMPOWERMENT
TRANSACTION YET IN THE SOUTH AFRICAN PRIVATE HEALTHCARE INDUSTRY
Medi-Clinic, one of South Africa`s three big private hospital groups, has taken
steps to enable the implementation of the largest empowerment transaction yet
seen in the South African private hospital industry.
`We have supported meaningful empowerment in the private hospital industry for
many years and believe that the deal to put the Ahealth group in empowerment
hands is crucial to the future of the entire industry,` says Dr Edwin Hertzog,
the Medi-Clinic chairman.
Ahealth is the private hospital group owned by African Oxygen Limited (Afrox).
It is being acquired by Bidco, an empowerment vehicle formed to make the
acquisition. `This transaction would not have been possible as an empowerment
deal without the foresight, acumen and commitment to empowerment of Medi-
Clinic,` says Bidco chairman Prof Jakes Gerwel. `Medi-Clinic must get the
credit for shaping what was a purely commercial transaction to everyone else,
into an empowerment jewel.`
He says that Medi-Clinic, Brimstone and Mvelaphanda Strategic Investments, the
shareholders in Bidco, have taken advantage of new funding options for the deal
to review Medi-Clinic`s participation. As a result Brimstone and Mvelaphanda
are in a position to attempt the transaction under their own steam, without Medi
Clinic having to provide financial guarantees or purchasing hospitals from Bidco
to improve the funding mix.
Under the new arrangement, Afrox will replace Medi-Clinic as the Bidco partner
to Brimstone and Mvelaphanda Strategic Investments. New funding options mean
that it is no longer necessary to sell any Ahealth hospitals to Medi-Clinic,
while Remgro and Medi-Clinic are released from their guarantees to the financial
institutions for funding the transaction. Bidco will pay an amount of R50m to
Medi-Clinic upon implementation of the transaction as a consideration for Medi-
Clinic relinquishing its right to participate in the transaction. Bidco will
also refund all of Medi-Clinic`s costs in the transaction to date.
`We are confident of taking advantage of new funding options and being able to
raise the necessary finance for the transaction, now that the financial
institutions look upon the Bidco transaction more favourably,` says Gerwel. He
explains that the environment for financing the Bidco transaction was distinctly
unfavourable, exacerbated by virtually all the financial institutions being tied
to a rival bid. Medi-Clinic together with Mvelahpanda and Brimstone understood
the true value of Ahealth, but the wider understanding of the value proposition
among financiers has also now improved.` He says that Medi-Clinic is enabling
the empowerment of South Africa`s second largest hospital group. `The industry
as a whole owes Medi-Clinic a debt of gratitude for being the architect and
enabler of such a milestone empowerment deal that reshapes the profile of the
entire private hospital sector in South Africa.`
Dr Jackie Mphafidi, Chairman of Mvelaphanda Strategic Investments, expects the
Competition Tribunal to approve the transaction: `This new arrangement brings no
material change, other than empowerment ownership, to the industry. With the
Healthcare Charter that is in the process of being formulated, this is a welcome
development and a landmark deal. Any possible intervening party will now only be
trying to feather its own nest.`
Medi-Clinic expects to focus its attention on new growth opportunities; `We are
constantly reviewing new growth opportunities. Now that Medi-Clinic no longer
has to provide its balance sheet as back-up for Bidco`s empowerment deal, we can
focus on other opportunities that exist or may arise, particularly given the
recent relaxation in foreign exchange controls,` says Louis Alberts, Medi-Clinic
managing director.
He says that the group is particularly proud of its efforts to facilitate
empowerment through Ahealth, `even if some of our competitors tried to put a
different spin on the structure of the deal.` He says the facts and history of
the deal are self-explanatory.
In 2003, Remgro and Medi-Clinic invited Brimstone and Mvelaphanda Strategic
Investments to form a consortium called Bidco, 75% controlled by the two
empowerment companies, Brimstone and Mvelaphanda Strategic Investments, to bid
for the Ahealth private hospital group (63 hospitals and about 7400 beds) from
Afrox, which put Ahealth up for sale in a transaction worth more than R3
billion. Given the size of the deal, it was assumed in the industry that an
empowerment transaction on this scale would not be possible, due to funding
difficulties for such a large transaction.
Medi-Clinic believed otherwise, participated in the formation of Bidco and
proposed to Afrox that empowerment could be facilitated if the transaction took
place in two phases; the acquisition of Ahealth by Bidco and the purchase of a
limited number of the Ahealth hospitals from Bidco by Medi-Clinic, to balance
commercial and empowerment goals with acceptable financial risk. `Medi-Clinic`s
entire approach was based on sound business practice by finding the best model
to enable empowerment while prudently balancing the commercial and financial
risk of all the parties involved, explains Gerhard Swiegers, the Medi-Clinic
financial director.
The deal would ensure that the empowerment partners were in full control of one
of the three big private hospital groups in the country with an acceptable
financial risk profile and sustainable funding model; `At that time the
financial institutions would only finance the transaction if Medi-Clinic put its
own balance sheet at risk,` says Gerwel. Afrox agreed to this two-phase
approach and awarded the bid for Ahealth to Bidco in November 2003, on the
proviso that only the first leg of the deal would be notified with the
competition authorities immediately, in order to speed up completion of the
transaction. Bidco could then follow the legal process of notifying the second
leg of the transaction with the competition authorities at a later stage.
The Competition Commission approved the transaction and as is required, referred
the matter to the Competition tribunal, where the hearings are set to resume on
24th January 2005. Netcare, the biggest private hospital group in the country
and a few seemingly related parties have opposed the transactions for reasons
that can be speculated about. `We can only assume that at least one of the
reasons is likely to be that they opposed the second leg of the transaction
because they would prefer not to compete with some of these hospitals under Medi
Clinic management,` says Alberts.
PLEASE SEE NEXT PAGE FOR EDITORS NOTES
EDITORS NOTES:
For further media enquiries please contact:
BIDCO: Johannes van Niekerk at College Hillon tel: 011-447-3030 or cell
0829219110
or e-mail johannesv@collegehillir.com
Prof Jakes Gerwel of Bidco on tel: 021-424-3346
MEDI-CLINIC: Willem Eksteen at Baird`s Renaissance on 011-504-4000 or cell
0720398389
or e-mail willem@bairds.co.za
Michael Acott at Baird`s Renaissance on 011-504-4000 or cell
0828215656
or e-mail michael@bairds.co.za
Gerhard Swiegers Financial Director of Medi-Clinic on 021-809-6500
