| Tue 25 Apr 2006, 9:05 | | Netcare - Acquisition Of General Healthcare Group |
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NTC
NTC
Netcare - Acquisition Of General Healthcare Group Limited, The Leading Private
Hospital Operator In The United Kingdom
Network Healthcare Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1996/008242/06
JSE code: NTC
ISIN: ZAE000011953
("Netcare" or "the Group")
ACQUISITION OF GENERAL HEALTHCARE GROUP LIMITED, THE LEADING PRIVATE HOSPITAL
OPERATOR IN THE UNITED KINGDOM
INTRODUCTION
Further to the cautionary announcement issued on 21 April 2006, the Board of
Directors of Netcare is pleased to announce that the Group has entered into an
agreement to acquire a controlling interest in the leading private hospital
operator in the United Kingdom ("UK"), General Healthcare Group Limited ("GHG",
or "the Company") from BC Partners Limited.
GHG is the leading provider of private acute care in the UK, with a national
network of 49 hospitals. The Company"s facilities and doctor base enable it to
offer a comprehensive range of medical and surgical services across the UK. For
the year-ended 31 December 2005 GHG reported gross revenue and earnings before
interest, taxation, depreciation and amortisation ("EBITDA") of GBP612m (R7.1bn)
and GBP164m (R1.9bn) respectively (applying an average rate of exchange for the
stated period of R11.56:1GBP). See table below entitled "Overview of the
combined Group" for further information.
Netcare has undertaken the acquisition of GHG as part of a consortium (the
"Consortium") with three leading UK-based financial and property investors -
funds advised by Apax Partners Worldwide LLP ("Apax Partners"), London and
Regional Properties ("L&R") and funds advised by Brockton Capital LLP
("Brockton") (together, "the Consortium Partners").
The purchase consideration for GHG on an enterprise value basis is in the order
of GBP2,2bn (R23.7bn) (applying a rate of exchange of R10.75:1GBP as at 24 April
2006, being the latest practicable date prior to the date of this announcement)
with Netcare"s investment being by way of an equity investment of approximately
GBP217m (R2.3bn) and the injection of its wholly-owned UK subsidiary Netcare
Healthcare UK Limited ("Netcare UK"). The remaining purchase consideration is
to be provided by the Consortium Partners, together with debt financing raised
within GHG on a non-recourse basis to Netcare.
The acquisition of a controlling interest in GHG transforms Netcare into one of
the world"s largest hospital groups with significant potential for future growth
and value creation for all stakeholders, both locally and internationally.
RATIONALE
There are increasing opportunities on a global basis for healthcare operators to
offer innovative solutions to rising medical costs due to, inter alia, ageing
populations, new epidemics, changes in medical technology and growing waiting
lists. Netcare has always sought to be at the forefront of these innovations and
solutions.
Following significant consolidation of the South African private hospital
industry over the past few years, the quantum of acquisition opportunities has
declined, and with that, Netcare has, for some time, been investigating
expansion opportunities internationally. With the Group"s core assets and
resources firmly based in South Africa, Netcare remains confident of achieving
solid organic growth in the local market. Importantly, the Group is fully
committed to providing affordable, quality healthcare and embraces the
Department of Health"s drive to achieve equity in access to healthcare. To this
end the Group will endeavour to work closely with Government and other
stakeholders to find sustainable products and services to bring better care to
more people of South Africa.
During 2002 Netcare established Netcare UK, a UK subsidiary focusing on the
provision of care to National Health Service ("NHS") patients via contracts
awarded by the UK Department of Health. Netcare UK has become a pathfinder in
NHS outsourcing programmes and is also a member of "NHS Partners Network", a
group of healthcare providers committed to working closely with the NHS.
Following Netcare"s acquisition of a controlling interest in GHG, the strategy
for the combined group in the UK will involve:
- the continued commitment by Netcare to being the NHS"s partner of choice,
providing sustainable solutions for the benefit of patients;
the further development of the private acute market, serving both the insured
and self-pay sectors;
- delivering the highest possible standards of patient care across all our
services;
- using the combined expertise and experience of the senior teams from both
businesses to drive innovation, excellence and growth;
- being the independent employer of choice, offering outstanding career
opportunities for high calibre individuals; and
- using the consortium"s financial strength to invest in maintaining long-
term leadership as the UK healthcare market expands due to an ageing population.
GHG has a very strong management team with whom Netcare will partner to drive
forward the development of the UK business. As a result, the acquisition of
GHG, together with existing Netcare UK management, will not denude Netcare South
Africa of resources or management capability.
The key benefits to Netcare of the acquisition of GHG are that it:
- establishes Netcare as one of the world"s largest healthcare groups, with
120 hospitals and ambulatory day care centres and over 11,500 beds under
management;
- provides Netcare with a clear leadership position in the UK, one of the
largest and most attractive healthcare markets globally;
- enhances the growth prospects for Netcare as a result of the opportunities
within the UK healthcare market;
- enables Netcare to leverage its intellectual property through the
introduction of certain operating skills and practices, as well as ancillary
healthcare businesses across the GHG business;
- benefits from pro-active management of the GHG property portfolio, via the
skills and expertise of the Consortium Partners; and
- provides Netcare with a meaningful platform for future international growth
in the longer term.
OVERVIEW OF THE COMBINED GROUP
Netcare* GHG Combined %
Group impact
Hospitals and 71 49 120 69%
ambulatory day care
centres
Beds 9,285 2,476 11,761 27%
Theatres 358 152 510 42%
Pharmacies 82 37 119 45%
Revenue (2005) GBP689m GBP612m GBP1,301m 89%
Revenue (2005) - R7,5bn R7,1bn R14.6bn
Rands**
EBITDA (2005) GBP132m GBP164m GBP296m 124%
EBITDA (2005) - R1,4bn R1,9bn R3.3bn
Rands**
Net Asset value GBP115m
(2005)
Net Asset value R1.3bn
Rands***
Employees 16,574 8,300 24,874 50%
* = Includes Subsidiaries, Associates, Public Private Partnerships and Netcare
UK
** = Converted at R11.56:GBP, being the average rate for the 12 month period
ended 31 December 2005
*** = Converted at R10.91:GBP, being the closing rate as at 31 December 2005
Note:
Netcare financial information is prepared in accordance with SA GAAP whereas GHG
financial information is prepared in accordance with UK GAAP
TRANSACTION STRUCTURE
The Consortium is acquiring 100% of GHG for a total consideration of GBP2.2bn
(R23.7bn) on an enterprise value basis.
Netcare will own 50.1% of GHG in return for the investment of approximately
GBP217m (R2.3bn) ("Netcare"s investment") and the contribution of Netcare UK.
Netcare"s investment will be funded using new debt facilities provided by
Dresdner Bank AG (London Branch) that have been raised for the purposes of this
acquisition. The remaining funds will be provided by the Consortium Partners
and debt financing provided by Barclays Capital raised within GHG on a non-
recourse basis to Netcare South Africa.
The acquisition, which is unconditional, is expected to be effective on or about
12 May 2006. Further announcements relating to this transaction will be made to
shareholders from time to time.
Netcare has obtained irrevocable support for the transaction from shareholders
owning more than 50% of the votable shares of Netcare.
OVERVIEW OF CONSORTIUM PARTNERS
Apax Partners
Apax Partners, created in 1972, is one of the world"s largest private equity
firms and has expertise focused on five industry sectors, in particular
healthcare. Apax Partners has raised approximately $20bn around the world, and
invested in more than 500 companies. Since 1995, over 65 of its portfolio
companies have gone public on stock markets around the world. At point of entry
to market, these companies had a collective market capitalisation of over $34
billion. Recent related investments include Molnlycke Health Care (a Swedish
manufacturer of medical supplies), Regent Medical (a UK producer of antiseptics
and surgical gloves) and MediMedia (one of the four largest healthcare
publishing companies in the world).
L&R
Headquartered in London, L&R is one of the largest private property companies in
Europe with investments, developments and business interests exceeding Euro6.0
billion in over seven countries, including the UK, Sweden, Finland, Germany,
Denmark and Lithuania. L&R was established in 1987, and is owned by Richard
Livingstone and Ian Livingstone. L&R has offices in London, Stockholm and
Helsinki.
Brockton
Brockton is a UK-only opportunity fund established in 2005 by David Marks and
Jason Blank, who have significant experience in real estate and dealing with
private equity. Brockton"s first fund, Brockton Capital I, raised GBP150m and
has a life of five years. Brockton recently acquired the head office of GAM
investments fund at St James"s in London SW1 for GBP25m.
FINANCIAL EFFECTS
As the accounting implications of IFRS and the property revaluations are in the
process of finalisation and the debt structures of the Company are being
refinanced, it is not possible to quantify the pro-forma financial effects of
the transaction with reasonable certainty. As a result, the pro-forma financial
effects will only be announced once these implications have been finalised and
reviewed by the reporting accountants.
DOCUMENTATION
A circular containing full details of the acquisition of GHG by the Consortium
will be posted to shareholders in due course.
CAUTIONARY ANNOUNCEMENT
With reference to the cautionary announcement dated 21 April 2006, and given
that further details relating to this transaction remain to be published,
shareholders are advised to exercise caution when dealing in their securities
until a further announcement is made.
25 April 2006
Johannesburg
Dresdner Klienwort Wasserstein - Financial Advisor to Netcare
Dresdner Bank AG (London Branch) - Provider of finance to Netcare
KPMG Services (Proprietary) Limited - Transactional Sponsor to Netcare
Norton Rose and HR Levin - Legal Advisors to Netcare
Ashursts - Legal Advisor to the Consortium
Centric Capital - Advisor to Netcare
Barclays Capital - Debt providers to the Consortium
Date: 25/04/2006 09:06:16 AM Produced by the JSE SENS Department
