| Thu 12 Oct 2006, 14:50 | | Netcare - Issue of Senior Guaranteed Convertible B |
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NTC
NTC
Netcare - Issue of Senior Guaranteed Convertible Bonds due 2011
THIS ANNOUNCEMENT IS NOT FOR DISTRIBUTION, DIRECTLY OR INDIRECTLY IN THE
UNITED STATES OR TO US PERSONS, CANADA, AUSTRALIA, JAPAN
NETWORK HEALTHCARE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1996/008242/06)
JSE share code: NTC & ISIN: ZAE000011953
("Netcare" or "the company")
ISSUE OF SENIOR GUARANTEED CONVERTIBLE BONDS DUE 2011
1. Introduction
Shareholders are referred to the press release dated 28 September
2006, in terms of which the Board of Directors of Netcare ("Board")
announced that Netcare intends to issue unsecured convertible bonds
due in 2011 which are convertible into Netcare ordinary shares
("convertible bonds"), in terms of the general authority to issue
convertible securities for cash approved by shareholders at the Annual
General Meeting of Netcare held on 27 January 2006 ("general issue").
The accelerated bookbuild process mentioned in the press release
closed at 00h00 GMT on 27 September 2006.
The convertible bonds will be issued to international institutional
investors, all of whom are deemed to be public shareholders as defined
by the Listings Requirements of the JSE Limited ("JSE").
In terms of this bookbuild Netcare has raised R 1,500 million
(excluding the greenshoe option of R 200 million which was
subsequently exercised). The ordinary shares to be issued on
conversion of the convertible bonds will represent approximately 6.25%
of Netcare"s current issued share capital. The proceeds of the general
issue will be used for general day to day operating requirements.
The convertible bonds were listed on the Singapore Exchange Securities
Trading Limited on 12 October 2006.
2. Salient terms of the convertible bonds
2.1 the principal amount constituting the total issue price for the
convertible bonds amounts to R 1,700 million including the over-
allotment (greenshoe) option of R 200 million mentioned in the
press release dated 28 September 2006;
2.2 the convertible bonds will carry a fixed coupon rate of six
percent per annum payable semi-annually in arrears in equal
instalments;
2.3 the convertible bonds will be unsecured but will be guaranteed by
a number of wholly owned South African subsidiaries of Netcare on
a joint and several basis;
the convertible bonds will be convertible at the instance of the
holder into ordinary shares at an issue price of 1530 cents per
ordinary share, but will also be subject to a downward adjustment
under certain circumstances;
2.5 Netcare will have a right to redeem and/or acquire the
convertible bonds after 23 November 2009 subject to a share price
test and the convertible bond holders may require Netcare to
redeem the convertible bonds upon occurrence of an event of
default, a change of control of Netcare or certain tax events;
2.6 the convertible bonds will mature five years from their date of
issue.
Application will be made to the JSE to list the ordinary shares issued
pursuant to the conversion of the convertible bonds as soon as practicable
following their conversion.
3. Unaudited pro forma financial effects
The table below sets out the pro forma financial effects of the
general issue on the published interim results of Netcare for the six
months ended 31 March 2006, and assumes that the General Healthcare
Group ("GHG") acquisition was implemented for income statement
purposes on 1 October 2005 and for balance sheet purposes on 31 March
2006. Due to the nature of these pro forma financial effects, they
are presented for illustrative purposes only and may not fairly
present Netcare"s financial position or the results of its operations
after the general issue. Consequently historical performance is not
an appropriate reflection of future prospects.
With regard to the pro forma financial effects after the GHG
acquisition, shareholders should note that a simple consolidation of
the historical financial information does not appropriately reflect
the future prospects of the combined businesses due to, inter alia,
the following factors which are not incorporated:
* any efficiencies in relation to the improved cost of finance upon
refinancing both the GHG and Netcare debt from the bridging
facilities;
* exchange rate variances;
* the benefits of the revenue optimisation and operational
excellence initiatives which form part of Netcare"s initial three
year and ensuing seven-year business plan for GHG;
* National Health Service ("NHS") tenders being bid on by Netcare
UK and Amicus (a division of GHG) or for which they have been
granted preferred bidder status;
* rationalisation benefits arising from cross-pollination
initiatives between Netcare, GHG and Netcare UK;
* the full impact of existing Netcare UK contracts with the NHS;
and
* The earnings accretive effects of the Netpartner transaction, as
this transaction would not have been implemented as at the
reporting date of this announcement (i.e. 31 March 2006).
The pro forma financial effects are the responsibility of the Netcare
directors.
Before the After the After the % change
GHG GHG general after the
acquisition acquisition issue(3) general
and the (2) issue
general
issue(1)
Basic earnings per 25.4 98.1 98.6 0.6%
share (cents)
Diluted basic 24.8 95.9 92.8 (3.1)%
earnings per share
(cents)
Headline earnings 25.6 19.0 19.5 2.6%
per share (cents)
Diluted headline 25.0 18.5 18.3 (1.2)%
earnings per share
(cents)
NAV per share 244.7 244.7 248.20
(cents)
NTAV per share 213.1 (744.3) (740.9)
(cents)(4)
Weighted average 1448.3 1448.3 1448.3
number of shares
(million)
Diluted weighted 1482.9 1482.9 1538.5
average of shares
(million)
Notes:
1. The "Before" financial information has been extracted without
adjustment from Netcare"s published unaudited interim results for the
six months ended 31 March 2006.
2. The "After the GHG acquisition" calculations are based on the
following assumptions:
* Land and buildings within GHG were revalued to fair value;
* deferred tax at a rate of 30% was raised on the revaluation
surplus;
* existing debt within GHG at above market-related rates was
refinanced by market-related debt on acquisition. This had the
effect of reducing the finance charges for the period as a result
of the lower interest rates obtained;
* GHG income statement information for the pro rata six months was
converted at R11.14:GBP1, being the average rate for that period,
whereas balance sheet information was converted at R10.88: GBP1,
being the closing rate as at 31 March 2006; and
* depreciation was increased commensurately as a result of the fair
value revaluation of land and buildings.
3. The "After the general issue" calculations are based on the following
assumptions:
* As the proceeds of the general issue will be used for general
financing purposes, working capital requirements and
strengthening Netcare"s balance sheet, the impact on the balance
sheet is limited to the increase in equity as a result of the
conversion of the convertible bonds. Interest bearing debt
decreases by a commensurate amount.
* Debt repaid is assumed to bear interest at the average rate of
borrowing for the Netcare Group of 8.5%.
* The additional charge in respect of the convertible bonds
comprises the coupon payment as well as the accretion of the
liability to full face value over the term of the convertible
bonds.
* Tax at 29% has been raised on the interest saving.
4. The negative NTAV arises largely as a result of goodwill arising
from the GHG acquisition as well as goodwill within GHG. It is
expected that the goodwill acquired may reduce once the fair
value of all assets acquired (required in terms of International
Financial Reporting Statements ("IFRS") 3) is determined.
5. The pro forma financial effects have been prepared in terms of
The Guide on Pro Forma Financial Information issued by The South
African Institute of Chartered Accountants. In line with the
Listings Requirements of the JSE, Netcare formally adopted IFRS
with effect from 1 October 2005. GHG financial information for
the year ended 31 December 2005 has been restated in terms of
IFRS.
4. Fair and reasonable opinion
As the discount to the market price at the time of exercise of the
conversion of the convertible bonds will not be known at the time of
the general issue, in terms of the Listings Requirements of the JSE
the general issue is subject to Netcare providing its shareholders
with a fair and reasonable statement from an independent professional
expert indicating whether or not the general issue is fair and
reasonable.
Deloitte & Touche has been appointed by the board of Netcare as the
independent expert. Deloitte & Touche has reviewed and considered the
general issue and subject to the provisions contained in its opinion
letter, is of the opinion that the terms and conditions of the general
issue are fair and reasonable to the Netcare shareholders. This fair
and reasonable opinion has been lodged with the JSE and is available
for inspection at the registered office of the Netcare for a period of
10 business days from the date of this announcement.
Johannesburg
12 October 2006
Sponsor Independent expert
Merrill Lynch South Africa (Pty) Ltd Deloitte & Touche
Legal advisers Joint Bookrunners
HR Levin Attorneys, Notaries & Conveyancers Barclays Capital
Dresdner Kleinwort
THIS ANNOUNCEMENT IS NOT AN OFFER OF SECURITIES FOR SALE INTO THE UNITED
STATES. THE SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES TO,
OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS SUCH TERM IS DEFINED IN
REGULATION S UNDER THE U.S. SECURITIES ACT OF 1933) UNLESS THEY ARE
REGISTERED OR EXEMPT FROM REGISTRATION. THERE WILL BE NO PUBLIC OFFER OF
SECURITIES IN THE UNITED STATES. IN THE UNITED KINGDOM THIS ANNOUNCEMENT IS
DIRECTED EXCLUSIVELY AT PERSONS WHO FALL WITHIN ARTICLE 19 OR 49 OF THE
FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2001 OR
TO WHOM THIS ANNOUNCEMENT MAY OTHERWISE BE DIRECTED WITHOUT CONTRAVENTION
OF SECTION 21 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000. THE BONDS
REFERRED TO IN THIS ANNOUNCEMENT SHALL BE ISSUED ONLY TO SUCH PERSONS.
STABILISATION/FSA THIS ANNOUNCEMENT IS NOT AN OFFER FOR SALE OF OR
SUBSCRIPTION FOR BONDS TO MEMBERS OF THE PUBLIC IN SOUTH AFRICA IN TERMS OF
THE SOUTH AFRICAN COMPANIES ACT 1973 (AS AMENDED) OR TO SOUTH AFRICAN
RESIDENTS IN TERMS OF THE SOUTH AFRICAN EXCHANGE CONTROL REGULATIONS IN SO
FAR AS THOSE SOUTH AFRICAN RESIDENTS DO NOT HAVE THE APPROPRIATE APPROVALS
FROM THE SOUTH. AFRICAN RESERVE BANK TO SUBSCRIBE FOR OR PURCHASE THE BONDS
REFERRED TO IN THIS ANNOUNCEMENT.
Date: 12/10/2006 02:50:14 PM Produced by the JSE SENS Department
