| Fri 1 Jul 2005, 8:32 | | Netcare - Broad-Based Black Economic Empowerment I |
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Netcare - Broad-Based Black Economic Empowerment Initiative And Withdrawal Of
Cautionary Announcement
NETWORK HEALTHCARE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1996/008242/06)
Share code: NTC ISIN: ZAE000011953
(`Netcare` or the `Group`)
`HEALTH PARTNERS FOR LIFE`
BROAD-BASED BLACK ECONOMIC EMPOWERMENT INITIATIVE AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT
1. THE HEALTH PARTNERS FOR LIFE TRANSACTION
(THE `TRANSACTION`)
Shareholders are referred to Netcare`s announcement on 21 April 2005 regarding
its Health Partners for Life (`HPFL`) initiative, a strategy to effect broad-
based black economic participation and transformation within the Netcare Group.
On implementation of the equity ownership component of the Health Partners for
Life transaction, a broad grouping of predominantly Historically Disadvantaged
Individuals (`HDI`s`) will acquire 160 million Netcare shares (`the HPFL
Shares`) equal to approximately 10% of the equity in Netcare, an acquisition
valued at almost R1 billion.
On implementation of the HPFL initiative approximately 27% of Netcare`s shares
will, either directly or indirectly, be controlled by HDI and broad-based BEE
and community institutions, including the Public Investment Corporation (PIC).
The HPFL initiative is another Netcare undertaking to transform healthcare by
mobilising the potential of all South Africans and ensuring better care to more
people. This also reflects the Group`s ongoing commitment to provide the best
quality of accessible and affordable healthcare through a world-class
infrastructure of medical facilities, professionals and technology.
This announcement provides further details of the transaction, which will be
contained in a circular to Netcare shareholders for approval at a general
meeting scheduled for 16 September 2005. If approved, the transaction will take
effect on 1 October 2005.
2. THE PARTICIPANTS IN THE TRANSACTION
Netcare`s strategic visions and values have been the basis of the Trust
categorisations and the selection of participants in the HPFL transaction. The
nature of the Trusts and participants are:
% Approximate
Name of Trust Beneficiaries of HPFL value
shares R`m
The Patient
Care Trust Nurses and Care Givers 37,5 375
The Passionate Netcare management 20,0 200
People Trust and staff
The Physician
Partnerships Doctors 30,0 300
Trust
The Mother Children and Women 7,5 75
& Child Trust
The Healthy Sport and Wellness 5,0 50
Lifestyle Trust groups
2.1 The Mother & Child Trust ? Our Children/Our Future
This Trust will be allocated 7,5% of the HPFL Shares with an
approximate acquisition value of R75 million. It is intended that this
will provide healthcare assistance to more than 10 000 woman and
children beneficiaries, through selected Woman`s Groups and Children`s
organisations, including, but not limited to the National African
Women`s Alliance (`NAWA`).
Established early in 2003, NAWA is representative of black women
throughout the country, being 100% owned, controlled and managed by
previously disadvantaged women from various professions, businesses
and industries.
NAWA`s emphasis on empowerment, development and the creation of better
opportunities is centred on those who want it, need it and are willing
to use it.
The NAWA structure is unique and fulfils requirements and needs with
regard to,
* Government`s BEE initiatives;
* Gender inequality issues;
* Broad-based empowerment; and
* Skills development and transfer.
NAWA highlights the social reality and potential value that women
contribute to the national task of change and transformation, economic
growth and the extension of democracy in South Africa.
NAWA`s composition and structure has established it as a unique force
in achieving the country`s BEE objectives through, inter alia, the
following:
Broad-based:
* Direct shareholding in NAWA consists of about 900 to 1 000 women
with 4 500 indirect beneficiaries who are dependents of the
shareholders. A further estimated 6 000 women will benefit from NAWA
via the provincial Trusts.
* Representation of all nine provinces of South Africa via NAWA`s
provincial structures.
Involvement in community and social upliftment projects:
* The structure of NAWA in itself represents social and community
upliftment, especially through the provincial structures.
* Furthermore, the Development and Empowerment Trusts in the provinces
will be used as vehicles to facilitate healthcare, growth and
development of women in rural and underdeveloped communities.
Mother and Child Health Services
It is intended that the Trustees will apply portion of its
distributions to contribute to, inter alia, the reduction of maternal
and infant mortality rates, focusing on cervical and breast cancer
screening for woman, antenatal care, nutrition affecting maternal
health and child health through wellness baby clinics and programmes
dealing with gastro-enteritis and congenital heart diseases. They will
also focus on emerging and re-emerging diseases affecting rural Black
communities by increasing access to health education, health promotion
and primary care.
2.2 The Healthy Lifestyle Trust ? Our Body ? Sport and Wellness
With an allocation of 5% of the HPFL Shares at an approximate
acquisition value of R50 million, the mandate of the Trustees will be
to promote a healthy lifestyle through wellness programmes and
selected national screening initiatives.
The Healthy Lifestyle Trust will make distributions to national
sporting bodies to promote sport in rural and underserved areas,
focusing on development and growth to 2010 and beyond. Through the
media and other projects, this Trust will also promote healthy
lifestyle choices such as physical exercise, weight loss and proper
nutrition.
2.3 The Patient Care Trust # Our Hearts # Nurses and Care Givers
Through this Trust an allocation of 37,5% of the HPFL Shares with a
value of approximately R375 million will benefit over 8 700 Nurses,
Paramedics and other care givers, who are key contributors to the
implementation of Netcare`s philosophy of `Best and Safest Patient
Care` and will be used to recognise, attract and retain quality care
givers.
2.4 The Passionate People Trust # Our Excellence # Our Management and
Staff
Supporting the Group`s strategies of `Growing with Passionate People`
and `Operational Excellence`, this Trust`s 20% allocation of the HPFL
Shares (valued at approximately R200 million) will benefit more than 9
200 members of management and staff of Netcare. Staff who are HDI`s
will be favoured in the allocation of benefits, but all staff,
regardless of race, colour or creed will benefit in recognition of
their involvement in the Netcare family and contribution to the health
of our society.
2.5 The Physician Partnership Trust # Our Skills # Doctors
This Trust will allocate its 30% of the HPFL Shares (valued at
approximately R300 million) to healthcare professionals and
educational bodies in recognition of their contribution to healthcare
in this country. These beneficiaries are predominantly HDI`s
associated with Netcare, Netpartner, the public and private sectors,
medical schools, academic institutions and shall also include
Registrars, medical students and doctors working in rural areas where
the need for quality medical treatment is more urgent. The
participation of educational bodies is intended to help ensure that
future South African medical graduates continue to rank amongst the
best in the world. It is expected that the number of beneficiaries of
this Trust will exceed 21 000 professionals.
In aggregate, the HPFL initiative is expected to reach more than 45
000 beneficiaries.
3. TRUSTEES
The following people have accepted appointment as Trustees of one or more of
the Trusts:
# Ms D Hlatswayo # Ms Hlatswayo matriculated from Mariannhill College, Durban.
She attained a Bachelor of Management from The Institute of Executive Education
and an MBA/MBL from UNISA, majoring in Corporate Finance. She was the
Chairperson of the Centre for Public Service Innovation, a member of the Board
of the Transnet Foundation, a member of the Board of the National Peace Accord,
a member of the Board of DTI Investments Committee and a member of The Institute
of Directors. Ms Hlatswayo belongs to a number of professional associations. She
recently began a new business after being a director of corporate finance and
advisory at Andisa Capital # Advisory group.
# Prof B Kistnasamy # Prof Kistnasamy is registered with the Health Professions
Council of South Africa as a Community Health Specialist. He holds an MBChB
degree from the University of Natal. He worked as the Head of the Northern Cape
Health Department before joining the Nelson Mandela Medical School as the Dean
focusing on health services. He is presently non-executive chairman of
Netpartner and a non-executive director of Netcare.
# Dr V L Litlhakanyane # Dr Litlhakanyane holds an MBChB degree from the
University of Natal, MMed and MBA degrees from the University of the Free State
and a post-graduate diploma in health Management from the University of Cape
Town. He has more than 10 years` health management experience and is presently
an executive director of Netcare.
# Mr L Mazwai # Mr Mazwai holds BA and LLB degrees from the University of
KwaZulu-Natal and is admitted as an Attorney. He serves on the Audit Committee
of the office of the Presidency, non-executive director of the Land and
Agricultural Development Bank of South Africa and is a member of the ad hoc
legal sub-committee of the Gauteng Provincial Government Labour Intensive
Monitoring Committee. He has extensive experience in advising public and private
sector clients on corporate and commercial legal issues.
# Dr B Nyembezi # Dr Nyembezi holds a BSc degree from the University of Fort
Hare, MBBch degree from the National University of Ireland and a post-graduate
diploma in Health Management (with distinction) from the University of Cape
Town. She was named the Oliver Tambo Fellow in Public Health Leadership in 1996.
She is registered with the Health Professions Council of South Africa as a
medical practitioner and worked as a doctor in the United Kingdom and South
Africa. Dr Nyembezi has extensive experience in public health management and is
passionate about public service delivery and presently serves as a non-executive
director on a number of boards of private companies. She presently manages her
own private consultancy.
# Ms T B Ntjantja Ned # Ms Ned holds a BA Social Work honours degree from the
University of Fort Hare, master`s degree in Social Work from the University of
Cincinnati, USA, post-graduate diploma in Policy and Development Management from
the University of the Witwatersrand and a post-graduate diploma Advanced
Executive Programme from Unisa School of Business Leadership. She has extensive
experience in Social work and social development in the public, private and NGO
sectors up to senior management level. Ms Ned was the Head of the Free State
Department of Social Development, Deputy Director General of the National
Department of Social Development, a programme officer for social policy and
local governance for UNICEF and a director for programmes with the Nelson
Mandela Children`s Fund. She is presently self-employed as a consultant in rural
development, social development and rights of children. She sits on a number of
boards of NGOs.
# Dr J Phaahla # Dr Phaahla was the first head of the South African Sports
Commission and was instrumental in the establishment of the new South African
Sports Confederation and Olympic Committee which is the national mother body of
South African sport. He was previously MEC for Health and Welfare in the
province of Limpopo and holds an MBChB degree from the University of Natal.
#Ms L Sangion # Ms Sangion is the founder and Chief Executive Officer of NAWA.
She holds a BA degree in communication and a Diploma in Public Relations. She
serves as a director of a number of BEE companies.
#Ms T Sibisi # Ms Sibisi is presently the Head of Transformation & Talent
Management at Netcare. She was previously a senior Human Resources Consultant
for IBM and holds an Honours Degree in Social Sciences, majoring in psychology
from the North West University and a Business Management Diploma from Henley
Management College in London. She has extensive experience in the Human
Resources field, both locally and internationally.
4. THE STRUCTURE OF THE TRANSACTION
4.1 The transaction has been structured to give effect to the following
principles:
4.1.1 Broad-based black economic empowerment which maximises the
Group`s transformation goals in particular and is aligned
with the expected content of the imminent Healthcare Charter
and of the recently revised Codes of Good Practice on Broad-
based Black Economic Empowerment released by the Department
of Trade and Industry.
4.1.2 From the outset the Trusts on behalf of their beneficiaries
will enjoy the full economic value and voting rights in
respect of the Netcare shares held by them.
4.1.3 A cost to shareholders in the form of dilution which is in
the range considered acceptable for transactions of this
nature. Netcare believes these costs will be convincingly
outweighed by the commercial benefits and growth to be
derived by the Group from the transaction in the medium to
long term.
4.1.4 The inclusion of participants who will contribute to the
growth of Netcare, through transformation of and recognition
of the dedication and contribution to healthcare made by its
doctors, nurses and staff.
4.1.5 Economic sustainability, so that the transaction is enduring
irrespective of conditions such as the performance of equity
markets or fluctuations in interest rates.
4.1.6 A flexible structure that allows for the award of benefits
proportionately to value-contribution.
4.2 Netcare has founded the HPFL Trusts as the vehicles through which
participation in the transaction will be effected. The Trusts will be
financed at market-related funding rates. The funding is structured in
the form of preference shares to be acquired by the Group and, in
respect of R100 million, by third party financiers. The funding will
enable the Trusts to acquire Netcare shares at an appropriate volume
weighted average traded price of Netcare shares preceding the
effective date and will be settled over time out of the receipt of
dividends or other payments by Netcare to shareholders, so that
ultimately the Trusts will own Netcare shares free of funding
obligations. In the meantime, each of the Trusts will have full power
to vote and will benefit from the increasing value of the Netcare
shares held.
4.3 In each case the economic benefits accruing to the Trusts will be
deployed by the Trustees for the beneficiaries of each Trust in the
manner required and in accordance with the objectives set out in the
applicable Trust Deed.
4.4 The beneficiaries of the Patient Care Trust, the Passionate People
Trust and the Physician Partnerships Trust will become entitled to
access the benefits of Netcare shares in tranches of 20% each per
annum over five years starting on the fifth anniversary of the
commencement of their participation.
Beneficiaries will have to continue to meet selected criteria to
qualify for benefits when the entitlement dates arrive.
4.5 The acquisition of Netcare shares by the Trusts will be through issues
of 107 344 454 shares for cash and a sale of the issued shares of one
of the wholly-owned Netcare subsidiaries that holds 52 655 546 of the
Group`s treasury shares, for which shareholder approval will be
specifically sought.
5. THE COST TO SHAREHOLDERS OF THE GROUP
The cost to existing Netcare shareholders of the transaction over the expected
term of the funding structure is estimated to be equal to 3,2% of the market
capitalisation of the Group based on the closing Netcare share price on 29 June
2005. This cost is within the range considered acceptable for this kind of
transaction. Deloitte has confirmed the reasonableness of the methodology used
to calculate the cost to existing shareholders. Netcare believes the cost will
be convincingly outweighed by the commercial and strategic benefits and growth
to be derived by the Group from this transaction as well as its related
strategies and transformation objectives in the medium to long term.
6. SALIENT DATES AND TIMES
2005
Issue and posting of circular on 25 August
Last day to lodge forms of proxy for the
general meeting by 10:00 on 14 September
General meeting to be held at 10:00 on 16 September
Announcement of results of general meeting on the
Securities Exchange News Service on 16 September
Publication of announcement of results of
general meeting in the press on 19 September
Effective date of the Health Partners for Life
Transaction and listing of new shares in Netcare on 1 October
Note:
These dates and times may be changed at the instance of Netcare. Any changes
will be published in the press and on SENS.
7. FINANCIAL AND ACCOUNTING EFFECTS
The transaction would not have had a material effect on earnings per share,
headline earnings per share, net asset value per share or net tangible asset
value per share for the six-month period to 31 March 2005, being the most recent
financial period on which Netcare has published financial results.
Upon adopting International Financial Reporting Standard 2 # Share-Based
Payments (`IFRS 2`), which is compulsory and will be introduced for the year
ending 30 September 2006, the shares issued by Netcare to the Patient Care Trust
and the Passionate People Trust will be valued at the date that benefits are
granted to employees and this value will be expensed in the Group`s income
statement over the qualification period for the benefits. Netcare estimates that
the impact of the transaction upon the adoption of IFRS 2 on headline earnings
will not be significant given the vesting features and nature of the HPFL
transaction.
The application of IFRS 2 to BEE transactions is subject to ongoing debate, both
in South Africa and internationally. The outcome of these discussions may have
an impact on the accounting treatment described above and, if material, further
announcements will be made.
8. OTHER TRANSFORMATION INITIATIVES
In regard to the following areas where the Group has made meaningful progress in
line with the targets set out by the Board of Directors and Transformation
Committee, a further announcement will be made in the weeks ahead:
* Control
* Enterprise development
* Skills development
* Employment equity
* Equity of access ? better care to more people
* Procurement
* Corporate and social investment
* HIV and AIDS
9. WITHDRAWAL OF CAUTIONARY
Having regard to the content of this announcement, Netcare withdraws its
previous advice to shareholders dated 21 April 2005 and 7 June 2005 to exercise
caution when dealing in Netcare shares.
Sandton
1 July 2005
CORPORATE ADVISOR AND LEGAL ADVISOR
JavaCapital
SPONSOR
Merrill Lynch South Africa (Pty) Ltd
Registration number 1995/001805/07
Registered Sponsor and Member of the JSE Securities Exchange South Africa
ATTORNEYS
H R LEVIN
Attorneys, Notaries and Conveyancers
REPORTING ACCOUNTANTS
PKF
Accountants and business advisers
Grant Thornton
Chartered Accountants (SA)
Accountants, Auditors and Business Advisers
INDEPENDENT ADVISOR
Deloitte
Date: 01/07/2005 07:15:16 AM
Produced by the JSE SENS Department
