| Thu 7 Sep 2006, 7:39 | | African Oxygen Limited - Disposal of interest in L |
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AFX
AFX
African Oxygen Limited - Disposal of interest in Life Healthcare
African Oxygen Limited
(Incorporated in the Republic of South Africa)
(Registration number 1927/000089/06)
Share code: AFX
ISIN code: ZAE000067120
("Afrox" or the "Company")
Disposal of interest in Life Healthcare
1. Introduction
Shareholders are advised that the Company has reached agreement to sell its
entire interest in its associate, Life Healthcare Group Holdings (Proprietary)
Limited ("Life Healthcare"), to Business Venture Investments No 813 (Pty)
Limited ("BEE Consortium 2"), for a total consideration of ZAR 850 million ("the
proposed transaction"). BEE Consortium 2 is a company owned by Brimstone
Investment Corporation Limited ("Brimstone"), Mvelaphanda Strategic Investments
(Proprietary) Limited ("Mvelaphanda"), Life Healthcare management (via the Ammed
Trust) and Life Healthcare employees (via the Life Healthcare Employees Trust).
Other participating shareholders in Life Healthcare, namely Old Mutual Life
Assurance Company (South Africa) Limited ("OMLACSA") , various entities in the
FirstRand Group (collectively "RMB") and Life Healthcare management through the
Ammed Trust are entitled to acquire a part of the sale interest from BEE
Consortium 2. It has been agreed that the sale interest will be acquired
directly by Brimstone, Mvelaphanda, OMLACSA, the Ammed Trust and RMB ("the
Purchasers") in agreed proportions. Afrox"s interest in Life Healthcare
comprises:
* 17,000 (20.00%) of Life Healthcare"s issued ordinary shares;
* 4,391 (29.28%) of Life Healthcare"s issued N ordinary shares;
* A shareholders loan with a face value of ZAR 200,446,428; and
* 259.282 class A preference shares.
Life Healthcare was previously known as Business Venture Investments No 790
(Pty) Ltd and was the purchaser of the entire share capital of Afrox Healthcare
Limited as of 23 March 2005. Life Healthcare is the holding company of Life
Healthcare Group (Pty) Ltd ("LHG"), a private healthcare service provider in
South Africa. LHG"s operations include private hospitals, sameday surgical
centres and healthcare services companies.
Afrox has been released from any and all claims arising from the Restatement of
Merger and Cooperation Agreement.
The effective date of the sale transaction shall be Friday, 29 September 2006,
on which date the purchase price shall be paid and the sale implemented and all
risk and benefit in the sale interest shall pass to the Purchasers, save only
that the Class A preference shares shall be sold ex any dividends which have
accrued in respect of the period ending on 30 September 2006.
2. Rationale for the transaction
Afrox acquired this minority shareholding for ZAR 375 million in March 2005, in
order to facilitate the purchase by Life Healthcare of Afrox Healthcare (as it
was then known), and had made known its intention to dispose of this
shareholding in the short to medium term. This transaction will allow Afrox to
realise a substantial return on its investment in Life Healthcare, and completes
the process of divesting Afrox"s healthcare interests and focusing on its core
Industrial Gas, Welding, LPG and Safety business. Furthermore, the transaction
will allow Afrox to realise cash for its equity accounted investment while
enhancing the empowerment credentials of Life Healthcare.
3. Details of the purchase consideration
Upon completion of the transaction on 29 September 2006, Afrox will receive
total consideration of ZAR 850 million in cash. Afrox has received bank
guarantees or letters of undertaking from the Purchasers for the total purchase
consideration.
The proceeds of the transaction will be used to reduce interest bearing debt and
to assist in funding current capital expenditure programmes.
4. Pro-forma financial effects of the transaction
The table below sets out the illustrative financial effects of the proposed
transaction on Afrox shareholders. The unaudited pro-forma financial effects
have been prepared for illustrative purposes only, and because of their nature
may not give a fair reflection of Afrox"s financial position nor of the effect
on future earnings after completion of the transaction. The pro forma financial
effects are the responsibility of the directors of Afrox.
Unaudited before Pro-forma % Change
the after the
transaction(1) transaction
Basic earnings per share 93.5 198.1 112%
(cents) (2) (6 months ended
31 March 2006)
Headline earnings per share 93.7 82.0 -12%
(cents)(2)(6 months ended 31
March 2006)
Net asset value ("NAV") per 583.4 699.6 20%
share (cents)(3)
Net tangible asset value 569.0 685.2 20%
("NTAV") per share
(cents)(3)
Number of shares in issue 308,568 308,568 -
("000)
Weighted average number of 308,568 308,568 -
shares in
issue ("000)
Notes:
Based on the unaudited published consolidated interim results of Afrox for the
six months ended 31 March 2006.
For purposes of adjustments to earnings per share and headline earnings per
share it was assumed that:
* the transaction was effected on 1 October 2005;
* all income and expenses associated with the investment in Life Healthcare
were eliminated;
* transaction costs of R6,5 million were paid;
* the net disposal consideration was used to reduce borrowings, and interest
on the surplus cash was earned at a pre-tax rate of 6.75% for the six month
period;
* a tax rate of 29% was applied where applicable; and
* CGT at a rate of 14.5 % was calculated on the capital gain on disposal of
the investment.
For purposes of adjustments to net asset value per share and net tangible asset
value per share it was assumed that:
* the transaction was effected on 31 March 2006;
* all assets and liabilities associated with the investment in Life
Healthcare were eliminated;
* the net proceeds, after payment of the transaction costs and CGT was
received on 31 March 2006; and
* NTAV was calculated after deducting goodwill and intangible assets from the
ordinary shareholders funds.
Johannesburg
07 September 2006
Financial advisers to Afrox: JPMorgan
Transaction sponsor: J.P. Morgan Equities Limited
Date: 07/09/2006 07:39:10 AM Produced by the JSE SENS Department
