| Tue 4 Oct 2005, 10:56 | | Medi-Clinic - Proposed black ownership initiative |
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Medi-Clinic - Proposed black ownership initiative and capital restructuring
Medi-Clinic Corporation Limited
(Incorporated in the Republic of South Africa)
(Registration number 1983/010725/06)
JSE share code: MDC
ISIN: ZAE000004370
("Medi-Clinic" or "the Company")
PROPOSED BLACK OWNERSHIP INITIATIVE AND CAPITAL RESTRUCTURING
HIGHLIGHTS
- R1.1 billion Black Ownership Initiative
- Immediate introduction of 15% black shareholding in Medi-Clinic
- Capital restructuring
- Special dividend of approximately R1.6 billion
1. INTRODUCTION
1.1 Black Ownership Initiative
The Board of Directors of Medi-Clinic ("the Board") is pleased to announce
that the Company has, subject to, inter alia, shareholder approval, entered
into a series of agreements aimed at the introduction of black shareholders
to Medi-Clinic (the "Black Ownership Initiative"). The Black Ownership
Initiative is aimed at introducing Phodiso Holdings Limited ("Phodiso") and
Circle Capital Ventures (Proprietary) Limited ("Circle Capital")
(collectively "the Strategic Black Partners") as strategic partners and
shareholders to Medi-Clinic ("Proposed SBP Transaction"). Furthermore, Medi
Clinic intends to introduce all employees up to, and including, first line
management level ("Participating Employees"), as shareholders to the
Company ("Proposed Employee Transaction").
The proposed Black Ownership Initiative will result in the transfer, in
aggregate, of 15% of Medi-Clinic"s entire issued ordinary share capital
("Medi-Clinic Shares") to the Strategic Black Partners and Participating
Employees. The Strategic Black Partners will jointly hold 11% and the
Participating Employees 4% of Medi-Clinic Shares. On implementation of the
Proposed SBP Transaction, Phodiso will hold approximately 6.9% and Circle
Capital approximately 4.1% of Medi-Clinic Shares ("Proposed Shareholding").
The Proposed SBP Transaction will be effected through a scheme of
arrangement in terms of Section 311 of the Companies Act, 1973 (Act 61 of
1973), as amended ("the Companies Act") ("the Scheme"), and the issue of
new Medi-Clinic Shares at par as detailed in paragraph 4.3 below. The
Proposed SBP Transaction will be implemented through two special purpose
vehicles, Mpilo Investment Holdings 1 (Proprietary) Limited and Mpilo
Investment Holdings 2 (Proprietary) Limited ("Mpilo 1" and "Mpilo 2",
respectively, and, collectively, the "Mpilo Companies"), each being wholly
owned by a Strategic Black Partner. "Mpilo" is derived from a Nguni word
"Impilo" which means "health".
The introduction of Participating Employees will be effected through the
issue of new Medi-Clinic Shares to an Employee Share Trust (the "Mpilo
Trust"), formed specifically for that purpose.
The total value of the proposed Black Ownership Initiative is approximately
R1.1 billion, which value is based on the proposed transaction price of
R18.40 per share. The price was calculated as the 30-day volume weighted
average price of the Medi-Clinic shares as traded on the JSE Limited ("the
JSE") to the close of business on 30 September 2005.
1.2 Capital Restructuring
As indicated in the profit announcement for the year ended 31 March 2005,
Medi-Clinic has been exploring various alternatives aimed at optimising its
capital structure. In addition, the Board has investigated several
alternatives through which excess capital can be distributed to
shareholders. In this regard, the Board has decided to introduce debt
funding in the amount of R700 million arranged by The Standard Bank of
South Africa Limited ("Standard Bank"). This debt will be used to pay down
existing inter company indebtedness in the Medi-Clinic group. The
introduction of such debt in relation to the facilities arranged by
Standard Bank will leave sufficient capacity to allow the group to fund
future strategic initiatives and respond to expansion opportunities.
In addition, the Board is pleased to announce the declaration of a special
dividend in the amount of R4.02 per share, which, taking into account the
envisaged enlarged number of shares in issue pursuant to the Black
Ownership Initiative, will amount to approximately R1.6 billion ("Special
Dividend"). The Special Dividend will be paid to all shareholders upon the
successful completion of the Black Ownership Initiative. Further details of
the Special Dividend are incorporated in paragraph 8 below.
2. RATIONALE FOR THE BLACK OWNERSHIP INITIATIVE AND CAPITAL RESTRUCTURING
2.1 Black Ownership Initiative
The Medi-Clinic Group operates in the private healthcare sector. Its main
business is to enhance the quality of life of patients by providing
comprehensive, high quality hospital services on a cost-effective basis.
The Board views Medi-Clinic as an integral part of the South African
political, social and economic community. The Board, therefore, endorses
the process of democratisation and strives to support this process through
a policy of business practices that enhance broad-based black economic
empowerment, which is regarded as a strategic opportunity to strengthen the
economic base of South Africa. The Board regards the rapid capital
accumulation at all levels of society involving human, social, intellectual
and physical capital, as a key success factor.
Medi-Clinic accordingly embarked on a process aimed at achieving the
following objectives:
- transforming Medi-Clinic as a growing company, and fulfilling a
leadership role in the healthcare sector in South Africa;
- active participation by black partners in the management of Medi-
Clinic;
- participation by employees in a share ownership programme;
- to the extent possible, financial neutrality to existing shareholders;
and
- a commitment by all shareholders to the joint creation of wealth
within Medi-Clinic.
The Board believes that employee share ownership presents a unique
opportunity to achieve broad-based black economic empowerment. For this
reason, the Mpilo Trust will be established and will subscribe for Medi-
Clinic Shares that will be held for the benefit of approximately 10 927
Participating Employees (52% of which are black and 89% are women), which
will include, inter alia, nursing staff, support staff and administrative
staff.
Medi-Clinic views the role of its people as crucial to the business success
of the group. In offering participation to employees, Medi-Clinic aims to
reward the contribution, loyalty and dedication of its employees.
Therefore, the level of participation will be linked to length of service
in the group. In addition, employee participation is aimed at encouraging
greater transparency and aligning the interests of Participating Employees
with that of Medi-Clinic Shareholders.
A draft Health Charter was released for comment to all industry
participants on 12 July 2005. Medi-Clinic, as a significant stakeholder in
the industry, has, together with other industry participants, entered into
a process of consultation in respect of, inter alia, the stipulated black
ownership targets. In view of this process, the Board has decided to adopt
a phased approach in respect of black economic empowerment, aimed at
transferring an initial 15% to black partners, with a view to increasing
such stake in due course.
2.2 Capital Restructuring
The Board has, as a separate strategic initiative, sought to optimise the
capital structure of the Company. In this regard, the introduction of new
debt, together with the declaration of the Special Dividend is aimed at
restructuring the capital position of the Company with the ultimate
objective of increasing the return on Medi-Clinic Shareholders" equity.
3. BACKGROUND INFORMATION ON THE STRATEGIC BLACK PARTNERS
3.1 Phodiso
Phodiso is a focused healthcare group which owns and operates a number of
successful businesses centred on the provision of quality healthcare
services. Phodiso is owned and operated by a group of 64 healthcare
practitioners and business people, and has a black ownership component of
94.4%.
Phodiso was originally established by the current group of shareholders in
1989 to launch a new healthcare facility, the Legae Private Clinic, to
service the emerging markets north-west of Pretoria. Today, Legae Private
Clinic is a significant participant in the region"s private healthcare
market and a highly successful business operation.
In the 1990s Phodiso began to implement a strategy to develop new
businesses which would support its core hospital services offering, these
include:
- pharmaceuticals and medical supplies; and
- Independent Practitioner network management.
In the last few years Phodiso has expanded its presence in the hospital
services industry through a series of joint initiatives with Medi-Clinic,
which include:
- a 20.6% interest in Curamed; and
- a 49% interest in Protector.
Phodiso"s involvement in Medi-Clinic"s Black Ownership Initiative is a
natural progression from their existing working relationship with the
Company and is a key strategic imperative for Phodiso.
Two of Phodiso"s directors, Dr Nkaki Matlala and Dr Vincent Msibi will be
involved in the future management of Medi-Clinic. Dr Matlala has already
assumed a full time senior executive position in Medi-Clinic as Director of
Clinical Relations and Dr Msibi will be available for nomination to the
Medi-Clinic Board.
Phodiso is well positioned to be Medi-Clinic"s long-term value adding
Strategic Black Partner given its focus, in-depth experience and successful
track record in the healthcare sector.
3.2 Circle Capital
Circle Capital, a new order, blue chip investment holding company, aims to
add value to and grow established companies, assisting them in
systematically navigating the challenges of transformation to increase
shareholder value. Circle Capital participates in investments in companies
of various sizes with varying needs such as Black Economic Empowerment
("BEE"), strategic leadership, access to capital and operational
management.
Circle Capital was founded by Hlumelo Biko and Blessing Rugara in 2002.
Since inception, a highly skilled and experienced executive management team
has been assembled with a demonstrated track record of success in the
private equity and empowerment investment arenas. Circle Capital enjoys
significant private and institutional investor support of its acquisition
programme.
Circle Capital"s sustainable partnership philosophy is cemented in its
commitment to help create opportunities for black South Africans by making
strategic investments in companies where Circle Capital will be able to
exert influence in human capital and transformation. The investment
philosophy of Circle Capital is based on investing in businesses that will
deliver sound business returns while enhancing transformation in the South
African business landscape.
Circle Capital"s business development initiatives are based on its
Integrated Service Platform ("ISP") model to drive growth and shareholder
value. The core elements of the ISP that are instilled within Circle
Capital and its investment companies are the development of human capital,
intellectual capital, social capital and physical capital.
The Circle Capital investment strategy is a diversified one and the company
actively pursues opportunities in the financial services,
telecommunications, manufacturing, healthcare, consumer goods and the
information, communications & technology sectors.
Circle Capital has identified the healthcare sector as one of the fastest
growing and most important sectors in the new South African economy. As
Chairperson of Circle Capital, Dr Ramphele"s vast experience both locally
and globally in the fields of human development makes for a mutually
beneficial partnership between Circle Capital and Medi-Clinic. Dr Ramphele
is already a member of the Board.
4. SUGGESTED MECHANICS FOR THE PROPOSED SBP TRANSACTION
4.1 Capitalisation
The Mpilo Companies are wholly owned subsidiaries of the Strategic Black
Partners and will be capitalised as follows:
- Standard Bank will subscribe for A preference shares in each of the
Mpilo Companies pro rata to their Proposed Shareholding in Medi-Clinic
for an aggregate amount of R200 million.
- The Strategic Black Partners will subscribe for ordinary shares in
each of the Mpilo Companies pro rata to their Proposed Shareholding in
Medi-Clinic for an aggregate amount of R80 million.
The equity contribution from Phodiso will be in the form of healthcare
interests that will be sold to Medi-Clinic. This transaction may, in
certain instances, require regulatory approval and, therefore, in order to
bridge such equity contribution, Standard Bank will also subscribe for an
extra special preference share in the amount of R50 million in Mpilo 1.
4.2 The Scheme
In terms of the Scheme, the Mpilo Companies will, in aggregate, acquire
from each Scheme Participant 4.25 ordinary shares for every 100 shares held
("the Scheme Shares") at the close of business on Thursday, 15 December
2005 ("the Record Date") for a consideration of R18.40 per Medi-Clinic
Share.
A total of approximately 14.9 million Scheme Shares will be acquired by the
Strategic Black Partners pro rata to their Proposed Shareholding in Medi-
Clinic, through their respective Mpilo Companies for an aggregate
consideration of approximately R273.5 million.
The implementation of the Scheme is subject to the fulfilment of the
conditions precedent set out in paragraph 7 of this announcement.
4.3 Issue of Medi-Clinic shares
Medi-Clinic will issue approximately 28.5 million ordinary shares to the
Mpilo Companies, pro rata to their Proposed Shareholding in Medi-Clinic, at
par, with an estimated market value of approximately R524.7 million (R18.40
per Medi-Clinic Share).
At the same time, Medi-Clinic will subscribe, at a nominal consideration,
for a special preference share in each of the Mpilo Companies, which
entitles Medi-Clinic to receive dividends in the aggregate amount of R524.7
million from the Mpilo Companies proportionate to their Proposed
Shareholding. The special preference shares will rank ahead of the A
preference shares and the ordinary shares in respect of cash flow and,
therefore, the monies accruing to the Mpilo Companies through, inter alia,
the special dividend will, via the special preference share, be paid back
to Medi-Clinic as a payment in terms of such special preference share.
4.4 Salient terms of Shareholders" Agreements
Medi-Clinic has, inter alia, entered into a shareholders" agreement with
each of the Strategic Black Partners in respect of their shareholding in
the Mpilo Companies. The salient terms of such shareholders" agreements
include the following:
- the Strategic Black Partners will each nominate one person to the
Board;
- the shareholding of the Strategic Black Partners in the Mpilo
Companies, and the shareholding of the Mpilo Companies in Medi-Clinic,
will be subject to a lock-in period of at least ten years. This lock-
in period is intended to establish a long-term working relationship
between Medi-Clinic and the Strategic Black Partners to the benefit of
all Medi-Clinic Shareholders; and
- the Strategic Black Partners have, inter alia, undertaken not to have
any involvement in any organisation that competes with any of Medi-
Clinic"s businesses.
5. INTRODUCTION OF EMPLOYEES AS SHAREHOLDERS IN MEDI-CLINIC
5.1 Proposed terms of the Mpilo Trust
All employees of the Company up to, and including, first line management
level will participate in the Black Ownership Initiative through the Mpilo
Trust. It is intended that the mechanism for such participation will be for
the benefit of current and, to a limited extent, future employees. The
total current Participating Employees will be approximately 10 927, of
which 52% are black and 89% are women.
Upon implementation, participation rights will be awarded to the
Participating Employees. The participation rights will legally vest on day
one and will entitle Participating Employees to full economic rights
attaching to a specified number of Medi-Clinic Shares. It is envisaged that
the participation rights will be allocated as follows:
- a minimum of 1 000 Medi-Clinic shares per employee; and
- a further allocation of approximately 80 Medi-Clinic shares for every
completed year of service.
There will be a total of five trustees to the Mpilo Trust, selected as
follows:
- three trustees will be elected from the ranks of the Participating
Employees and they will hold office based on a rotational basis; and
- two trustees will be appointed by the Board.
The trustees shall be responsible for, inter alia, the day-to-day
administration of the Mpilo Trust and voting the Medi-Clinic Shares held by
the Mpilo Trust. Participating Employees will have the opportunity to
direct the trustees as to the manner in which such Medi-Clinic Shares are
to be voted.
After the expiry of a ten-year period from the date upon which the Mpilo
Trust acquires the Medi-Clinic Shares, the Employees will, individually, be
able to:
- choose to remain as a participant in the Mpilo Trust on the same terms
and conditions;
- sell sufficient Medi-Clinic Shares to satisfy any outstanding capital
contribution; or
- take delivery of all allocated Medi-Clinic Shares by satisfying any
outstanding capital contribution.
5.2 Proposed mechanism
The Mpilo Trust will be formed through capital contributions by Medi-
Clinic"s operating subsidiaries totalling approximately R290.2 million. The
operating subsidiaries will be corporate beneficiaries and will have a
right to payment of dividends.
The funds received as a result of the capital contributions will be used to
subscribe for approximately 15.8 million Medi-Clinic Shares at a market
value of R18.40 per share, which will represent a 4.0% shareholding in the
enlarged issued share capital of Medi-Clinic.
The dividends earned by the Mpilo Trust on the Medi-Clinic Shares will be
utilised as follows:
- 100% of any special dividends will be distributed to the operating
subsidiaries of Medi-Clinic, as corporate beneficiaries of the Mpilo
Trust;
- 80% of any ordinary dividends will be distributed to the operating
subsidiaries of Medi-Clinic, as corporate beneficiaries of the Mpilo
Trust; and
- 20% of any ordinary dividends will be paid in cash to the relevant
Participating Employees in accordance with their participation rights.
6. GROUP STRUCTURE
The diagram illustrating the group structure subsequent to the implementation of
the Black Ownership Initiative will be published in the press.
7. CONDITIONS PRECEDENT
7.1 The Proposed SBP Transaction is subject to, inter alia, the fulfilment of
the following conditions precedent:
7.1.1 signature of all relevant agreements relating to the Proposed SBP
Transaction;
7.1.2 obtaining of all approvals required from the JSE for the
implementation of the Proposed SBP Transaction;
7.1.3 obtaining of any other regulatory approvals required for the
implementation of the Proposed SBP Transaction;
7.1.4 obtaining of all approvals from Medi-Clinic Shareholders for the
implementation of the Proposed SBP Transaction, including
shareholder approval required by the JSE Listings Requirements to
authorise the issue of Medi-Clinic Shares as contemplated in 4.3
above;
7.1.5 the approval of the Scheme by a majority representing not less
than three-fourths of the votes exercisable by Scheme members
present and voting either in person or by proxy at the Scheme
meeting;
7.1.6 sanctioning of the Scheme in terms of the Companies Act by the
Court;
7.1.7 registration of a certified copy of the Order of Court
sanctioning the Scheme by the Registrar of Companies in terms of
the Companies Act; and
7.1.8 provision of a guarantee by Circle Capital for its obligations to
subscribe and pay for the Ordinary Shares in terms of the
Proposed SBP Transaction.
7.2 The Proposed Employee Transaction is subject to, inter alia, the fulfilment
of the following conditions precedent:
7.2.1 obtaining of all approvals required from the JSE for the
implementation of the Proposed Employee Transaction;
7.2.2 obtaining of any other regulatory approvals required for the
implementation of the Proposed Employee Transaction; and
7.2.3 obtaining of all approvals from Medi-Clinic Shareholders for the
implementation of the Proposed Employee Transaction, including
shareholder approval required by the JSE Listings Requirements to
authorise the issue of Medi-Clinic Shares as contemplated in 5.2
above.
8. SPECIAL DIVIDEND
As discussed in paragraph 1.2 above, the Board has resolved to declare a Special
Dividend in the amount of R4.02 per Medi-Clinic Share subsequent to the
implementation of the Black Ownership Initiative. The salient dates for the
Special Dividend are as indicated below. The decision to pay the Special
Dividend after the successful implementation of the Black Ownership Initiative
was carefully considered by the Board and approved for the following reasons:
- the share price movements following the declaration of a special dividend
are unpredictable;
- to establish certainty as to the transaction price and, thereby, adding to
the sustainability of the Black Ownership Initiative; and
- the size of the Special Dividend per share to all shareholders was
positively impacted by the circular flow of funds back to Medi-Clinic in
respect of the special preference shares and capital contributions.
9. ECONOMIC COST
Medi-Clinic has estimated the economic cost of the Black Ownership Initiative to
be approximately R224.1 million. This translates into approximately 3.48% of the
market capitalisation of Medi-Clinic calculated with reference to the Medi-
Clinic Share price of R18.40 per share. The estimate does not include any costs
or taxes that may be directly attributable to Medi-Clinic Shareholders.
10. FINANCIAL EFFECTS
The unaudited pro forma financial effects set out below have been prepared to
assist Medi-Clinic Shareholders to assess the impact of the Black Ownership
Initiative and the Capital Restructuring on the earnings per share ("EPS"),
headline EPS ("HEPS"), net asset value ("NAV") and tangible NAV ("TNAV") per
share. These unaudited pro forma financial effects do not constitute a
representation of the future financial position of the Company on implementation
of the Black Ownership Initiative and Capital Restructuring. The material
assumptions are set out in the notes following the tables. These unaudited pro
forma financial effects are the responsibility of the Board and are provided for
illustrative purposes only.
For the purposes of clarity, the financial effects are presented under the
following scenarios:
- the sole implementation of the Black Ownership Initiative;
- the sole implementation of the Capital Restructuring;
- the cumulative effect of the Black Ownership Initiative and Capital
Restructuring; and
- the cumulative effect of the Black Ownership Initiative and Capital
Restructuring excluding the once-off effect of Secondary Tax on Companies
("STC") charged on the Special Dividend.
BLACK OWNERSHIP INITIATIVE
Audited
before the Unaudited Unaudited
Black pro forma pro forma
Ownership adjustments after the
Initiative Black Black
and Capital Ownership Ownership Percentage
Restructuring1 Initiative Initiative change
EPS
(cents) 157.5 (1.8)2 155.7 (1.1)
HEPS
(cents) 145.7 (1.8)2 143.9 (1.2)
NAV per
share
(cents) 772.6 (1.2)3 771.4 (0.2)
TNAV
Per
share
(cents) 758.6 (1.2)3 757.4 (0.2)
CAPITAL RESTRUCTURING
Unaudited
pro forma Unaudited Unaudited
after the pro forma pro forma
Black adjustments after the
Ownership Capital Capital Percentage
Initiative1 Restructuring Restructuring change
EPS
(cents) 155.7 (77.7)4 78.0 (49.9)
HEPS
(cents) 143.9 (77.3)4 66.6 (53.7)
NAV per
share
(cents) 771.4 (449.8)5 321.6 (58.3)
TNAV
per
share
(cents) 757.4 (449.5)5 307.9 (59.3)
CUMULATIVE EFFECT OF THE BLACK OWNERSHIP INITIATIVE AND CAPITAL RESTRUCTURING
Unaudited
Audited pro forma
Before the Unaudited after the
Black pro forma Unaudited Black
Ownership adjustments pro forma Ownership
Initiative Black adjustments Initiative
and Capital Ownership Capital and Capital Percentage
Restructuring1 Initiative Restructuring Restructuring change
EPS
(cents) 157.5 (1.8)2 (77.7)4 78.0 (50.5)
HEPS
(cents) 145.7 (1.8)2 (77.3)4 66.6 (54.3)
NAV per
share
(cents) 772.6 (1.2)3 (449.8)5 321.6 (58.4)
TNAV
per
share
(cents) 758.6 (1.2)3 (449.5)5 307.9 (59.4)
CUMULATIVE EFFECT OF THE BLACK OWNERSHIP INITIATIVE AND CAPITAL RESTRUCTURING
EXCLUDING THE ONCE-OFF EFFECT OF STC
Unaudited
Audited Unaudited pro forma
before the Unaudited pro forma after the
Black pro forma adjustments Black
Ownership adjustments Capital Ownership
Initiative Black Restructuring Initiative
and Capital Ownership (excluding and Capital Percentage
Restructuring1 Initiative STC) Restructuring change
EPS
(cents) 157.5 (1.8)2 (25.6)4 130.1 (17.4)
HEPS
(cents) 145.7 (1.8)2 (25.6)4 118.3 (18.8)
Notes and assumptions:
1. Extracted from the audited published results of Medi-Clinic for the year
ended 31 March 2005.
2. For the purposes of calculating EPS and HEPS in respect of the Black
Ownership Initiative, it was assumed that:
a) The Black Ownership Initiative was effected on 1 April 2004.
b) In terms of the application of IFRS 2 on the Proposed Employee
Transaction, the income statement will, over the 10-year vesting
period of the shares, be debited with an employee benefit expense of
R5.9 million per year.
3. For the purposes of calculating NAV per share and TNAV per share in respect
of the Black Ownership Initiative, it was assumed that:
a) The Black Ownership Initiative was effected on 31 March 2005.
b) 15 774 209 new shares will be issued to the Mpilo Trust at R18.40 per
share in terms of the Proposed Employee Transaction.
c) 28 515 026 new shares will be issued to the Strategic Black Partners
at 10 cents per share.
d) The 15 774 209 Medi-Clinic ordinary shares to be issued to the Mpilo
Trust at R18.40 per share are treated as treasury shares due to the
consolidation of the Mpilo Trust.
e) Estimated transaction costs amounting to R5.7 million will be paid in
cash and set off directly against reserves.
4. For the purposes of calculating EPS and HEPS in respect of the Capital
Restructuring, it was assumed that:
a) The Capital Restructuring was effected on 1 April 2004.
b) The payment of the Special Dividend of R1 585.3 million in terms of
the Capital Restructuring will attract a net once-off STC charge of
R198.2 million.
c) Dividends to be returned by the Mpilo Trust and the Strategic Black
Partners will contribute future STC savings of R29.7 million.
d) The Capital Restructuring will result in an increase in net finance
cost of R90.1 million after taxation. An interest rate of 6.7% (after
tax 4.7%) on surplus funds and 10.3% (after tax 7.2%) on new debt was
assumed.
5. For the purposes of calculating NAV per share and TNAV per share in respect
of the Capital Restructuring, it was assumed that:
a) The Capital Restructuring was effected on 31 March 2005.
b) The Special Dividend of R1 585.3 million and the related STC charge of
R198.2 million will reduce reserves by R1 783.5 million.
c) Dividends of R63.4 million are to be returned by the Mpilo Trust and
dividends of R174.4 million are to be returned by the Strategic Black
Partners. These dividends and related future STC savings of R29.7
million will increase reserves by R267.5 million.
d) A Standard Bank long-term loan of R700 million will be raised.
6. For the purposes of calculating the unaudited pro forma financial effects,
the weighted and issued number of ordinary shares is reduced by 34 656 818
shares, treated as treasury shares, being 15 774 209 shares attributable to
the consolidation of the Mpilo Trust and 18 882 609 shares being the
portion of the total amount of shares issued to the Strategic Black
Partners for which settlement of the transaction consideration remains
outstanding.
7. The South African Institute of Chartered Accountants ("SAICA") has issued
two exposure drafts, ED 199 and ED 200 which deal with the accounting for
BEE transactions. ED 200 is based on the International Financial Reporting
Interpretations Committee document D16 ("IFRIC D16"). Based on these, the
International Financial Reporting Standard 2 ("IFRS 2") may in future
become applicable to the Proposed SBP Transaction.
The implementation of the proposed interpretation statement, IFRIC D16, on
IFRS 2 may have the potential effect of a once-off charge to the income
statement of Medi-Clinic, with a corresponding increase in equity (a
separate reserve), for the fair value of shares issued at nominal value.
If ED199 and ED200 only become effective, prospectively, after 31 March
2006, it should have no impact on Medi-Clinic"s income statement. However,
if it is implemented before 31 March 2006, or if it is implemented
retrospectively after 31 March 2006, a charge to Medi-Clinic"s income
statement for the financial year ended 31 March 2006 will realise.
The accounting treatment of the Black Ownership Initiative can only be
finalised once comments have been received from the public on these
exposure drafts, by IFRIC and SAICA, and the related interpretation and/or
South African Statement of Generally Accepted Accounting Practice has been
issued.
11. LISTING ON THE JSE
It is intended that all new Medi-Clinic Shares issued to the Strategic Black
Partners and the Mpilo Trust will be listed on the JSE on Monday, 19 December
2005. An application for listing of such Shares will be submitted to the JSE on
Monday, 24 October 2005.
12. OPINION AND RECOMMENDATION OF THE BOARD
The Board is of the opinion that the terms and conditions of the Black Ownership
Initiative are fair and reasonable to the ordinary shareholders of Medi-Clinic.
Accordingly, the Board recommends that ordinary shareholders vote in favour of
the Scheme and the resolutions to be proposed at a general meeting of
shareholders of Medi-Clinic. In respect of their personal holdings in Medi-
Clinic, the Board members intend to vote in favour of the Scheme and the
resolutions to be proposed at the general meeting.
Dr Mamphela Ramphele is a beneficiary to the Ramphele Family Trust which holds
24.7% in Circle Capital Holdings ("Cicap"). Cicap holds a 64% interest in Circle
Capital. Accordingly, Dr Ramphele recused herself from the decision-making
process of the Board in respect on the Black Ownership Initiative.
13. SALIENT DATES AND TIMES
2005
Court Order issued to convene Scheme meeting Thursday, 27 October
Anticipated date for posting of the Circular to
Medi-Clinic Shareholders Tuesday, 1 November
Last day to trade Medi-Clinic Shares on the JSE in
order to be recorded in the register of members of
Medi-Clinic to vote at the Scheme
meeting on (note 2) Friday, 11 November
Record date for the Scheme meeting Friday, 18 November
Last day for receipt of forms of proxy for the
Scheme meeting by 10:00 on (notes 3 and 4) Monday, 21 November
Last day for receipt of forms of proxy for the
General meeting by 10:00 on (notes 3 and 5) Monday, 21 November
General meeting to be held at 10:00 on Wednesday, 23 November
Scheme meeting to be held at 10:30 or 10 minutes
after the conclusion or adjournment of the general
meeting, whichever is the later, on Wednesday, 23 November
Announcement of results of the general meeting and
the Scheme meeting on SENS on Wednesday, 23 November
Announcement of results of the general meeting and
the Scheme meeting in the press on Thursday, 24 November
Court hearing to sanction the Scheme on Thursday, 1 December
Lodgement of the Court Order Thursday, 1 December
IF THE SCHEME IS SANCTIONED AND IMPLEMENTED:
Announcement on SENS regarding the sanctioning of
the Scheme Thursday, 1 December
Announcement in the press regarding the sanctioning
of the Scheme Friday, 2 December
Expected last day to trade in Medi-Clinic Shares on
the JSE in order for Medi-Clinic Shareholders to be
eligible to receive the Scheme Consideration on Thursday, 8 December
Expected first day to trade in Medi-Clinic Shares
under new ISIN on the JSE ex-entitlement to the
Scheme Consideration on Friday, 9 December
Expected Record Date, being the date on which Medi-
Clinic Shareholders must be recorded on the register
of members of Medi-Clinic in order to be Scheme
Participants and so become entitled to receive the
Scheme Consideration, at 17:00 on Thursday, 15 December
Expected operative date of the Scheme, at the
commencement of trading on the JSE on Monday, 19 December
The Scheme Consideration is expected to be transferred
or posted (as the case may be), and new share
certificates expected to be posted to certificated
Scheme Participants whose documents of title are
received by the transfer secretaries before 12:00 on
15 December 2005 on Monday, 19 December
Or
failing receipt of documents of title before 12:00 on
15 December 2005, within five business days of receipt
thereof by the transfer secretaries.
The Scheme Consideration is expected to be credited
to the dematerialised Scheme Participants" accounts
held at their CSDP or broker and share balances
updated from Monday, 19 December
SALIENT DATES RELATING TO SPECIAL DIVIDEND
Last date to trade cum Special Dividend Thursday, 15 December
Shares to commence trading ex Special Dividend Monday, 19 December
Record Date in respect of the Special Dividend Friday, 23 December
Payment Date of the Special Dividend Tuesday, 27 December
Notes
1. The abovementioned times and dates are South African times and dates, and
are subject to change. Any such change will be published on SENS and in the
press.
2. Shareholders are advised that as trading in Shares on the JSE is settled
within the STRATE environment five business days following the trade,
shareholders acquiring dematerialised Shares after 11 November 2005 will
not be eligible to vote at the Scheme meeting.
3. If a form of proxy for the Scheme or general meeting is not received by the
time and date shown above, it may be handed to the chairperson of the
Scheme or general meeting by not later than 10 minutes before the Scheme or
general meeting is due to commence.
4. If the date of the Scheme meeting is adjourned or postponed, forms of proxy
must be received by no later than 24 hours prior to the time of the
adjourned or postponed Scheme meeting, provided that for the purposes of
calculating the latest time by which forms of proxy must be received,
Saturdays, Sundays and public holidays will be excluded.
5. If the date of the general meeting is adjourned or postponed, forms of
proxy must be received by no later than 24 hours prior to the time of the
adjourned or postponed general meeting, provided that for the purposes of
calculating the latest time by which forms of proxy must be received,
Saturdays, Sundays and public holidays will be excluded.
6. Shareholders may not dematerialise or rematerialise their Shares between
Friday, 9 December 2005 and Friday, 23 December 2005, both days inclusive.
14. NOTICE OF MEETINGS AND FURTHER DOCUMENTATION
14.1 The general meeting
A general meeting of Medi-Clinic Shareholders will be held at 10:00 on
Wednesday, 23 November 2005 at Medi-Clinic Offices, Strand Road,
Stellenbosch to consider and, if deemed fit, pass, inter alia, the
resolutions necessary to effect the Black Ownership Initiative.
14.2 The Scheme meeting
The Scheme meeting of Medi-Clinic Shareholders recorded in the
register of members of Medi-Clinic at the close of business on the
Record Date will be held at 10:30 or 10 minutes after the conclusion
or adjournment of the general meeting, whichever is the later, on
Wednesday, 23 November 2005 at Medi-Clinic Offices, Strand Road,
Stellenbosch to consider and, if deemed fit, to approve the Scheme.
14.3 Documentation
A circular providing further details of the Black Ownership Initiative will
be posted to Medi-Clinic Shareholders on or about Tuesday, 1 November 2005.
15. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to Medi-Clinic"s cautionary announcement released on
SENS on Friday, 30 September 2005 and are advised that such cautionary
announcement is accordingly withdrawn.
Stellenbosch
4 October 2005
Investment Bank to Medi-Clinic
Standard Bank
Attorneys
Hofmeyr Herbstein & Gihwala Inc.
Reporting accountants and auditors
PricewaterhouseCoopers Inc.
Tax advisors
PricewaterhouseCoopers Tax Advisory Services (Proprietary) Limited
Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
Senior debt arranger and funder to the Mpilo Companies
Standard Bank
Corporate advisor to Phodiso
PricewaterhouseCoopers Corporate Finance (Proprietary) Limited
Corporate advisor to Circle Capital
Circle Capital Fund Managers (Proprietary) Limited
Legal advisor to the Strategic Black Partners
Webber Wentzel Bowens
Date: 04/10/2005 10:57:17 AM Produced by the JSE SENS Department
