Acquisition of a 29.9% stake in Spire

RNS Number : 7783Q

Spire Healthcare Group PLC

22 June 2015

 

Spire Healthcare Group plc ("Spire")

and

Mediclinic International Limited ("Mediclinic")

Joint announcement regarding the acquisition of a 29.9 per cent. stake in Spire

Highlights

·      Remgro, Mediclinic's major shareholder, enters into an agreement to acquire a 29.9 per cent. stake in Spire from Cinven for 360 pence per share or GBP 432 million

·      Intention is for Mediclinic to acquire the stake from Remgro in the near future

·      Mediclinic is a leading South Africa-based private hospital group with operations in Southern Africa, Switzerland and the United Arab Emirates

·      As part of the investment, Mediclinic and Spire have agreed to explore ways in which they can work together. Remgro, or in due course Mediclinic, will have the right to nominate one director to the Board of Spire provided more than 15 per cent. in the issued share capital of Spire is held

·      Mediclinic and Remgro have confirmed that they have no current intention of making an offer for the whole of Spire

Robert Roger, CEO of Spire said: "We welcome Remgro, and in due course Mediclinic, as a new long term shareholder in our business. This is an exceptional opportunity for us to gain a strategic investor who understands our business and growth ambitions as we develop our asset base to meet the significant capacity growth we expect for the UK private healthcare sector in the medium to long term and we look forward to working with them to explore ways our two businesses can co-operate to serve both our patients and our shareholders even more effectively."

Danie Meintjes, CEO of Mediclinic said: "We are delighted to have identified the opportunity to acquire a meaningful holding in Spire, led by a strong and highly experienced management team, and can now realise it with the facilitation of Remgro. We are investing in a growing developed market while also diversifying into an attractive new geography with a strong currency. Both Mediclinic and Spire will benefit from collaboration through the sharing of knowledge and experience and improving cost synergies and efficiencies."

Introduction

The Boards of Spire and Mediclinic are pleased to announce that Mediclinic's major shareholder, Remgro Limited ("Remgro"), has entered into an agreement to acquire 119,923,335 ordinary shares in Spire (the "Shares"), representing 29.9 per cent. of the issued share capital of Spire from Cinven at a price of 360 pence per share. The total consideration amounts to GBP 431.7 million.

Mediclinic is a leading private hospital group, quoted on the Johannesburg Stock Exchange, with operations in Southern Africa, Switzerland and the United Arab Emirates. The company operates 70 hospitals and specialist care facilities with more than 27,000 staff. In the year to 31 March 2015, the Mediclinic group generated revenues of ZAR 35.2 billion (GBP 1.8 billion) and an operating profit of ZAR 5.72 billion (GBP 293 million).

In order to facilitate the transaction, Remgro has agreed to acquire the Shares through a wholly-owned subsidiary, Remgro Jersey Limited ("Closing"). As soon as Mediclinic has secured the requisite funding, Mediclinic will effectively acquire 100% of the interests in Remgro Jersey Limited, holding the Shares, from Remgro. Mediclinic intends to fund this acquisition of Remgro Jersey Limited by way of a fully underwritten ZAR 10 billion rights issue. Remgro, a 41.3% shareholder in Mediclinic, has committed to follow its rights and agreed to underwrite the proposed rights issue. The rights issue is expected to complete by the end of August, at which point Mediclinic will effectively acquire the Shares.

Rationale for the Share Purchase

Remgro and Mediclinic believe that an investment in Spire, as one of the UK's leading independent hospital groups, at 360 pence per share, has the potential for long-term value creation. In particular, its investment in Spire will, in due course, give Mediclinic exposure to:

·      The UK healthcare sector with its strong market growth prospects and good "through the cycle" returns, and

·      Spire's strong and highly experienced management team with its track record of taking long-term investment decisions and delivering excellent returns and profitability.

Remgro and Mediclinic also believe that the investment in Spire will be highly complementary to Mediclinic's existing operations, achieving a culture of sharing international best practice. Mediclinic and Spire have agreed to explore ways in which they can co-operate and share knowledge between their operations in areas such as staffing, clinical care and back office administration in order to improve both patient care and operating efficiency.

The Board of Spire, which was actively involved in the discussions that led up to Remgro's, and subsequently Mediclinic's, share purchase, welcomes Mediclinic as a long term shareholder who not only understands Spire's growth ambitions, but also intends to support them with its strategic insight from other private hospital markets.

Relationship Agreement and Board Representation

In view of Remgro's intermediary shareholding in Spire, Spire and Remgro have also entered into a formal Relationship Agreement that contains customary terms and conditions, including provisions intended to protect the company's confidential information. As part of that agreement, conditional upon Closing, Remgro has the right to nominate one non-executive director to be appointed or reappointed to the Board of Spire for so long as Remgro holds more than 15 per cent. in the issued share capital of Spire. Following Mediclinic's acquisition of the Shares from Remgro, the Relationship Agreement will be assigned to Mediclinic. The Board of Spire is therefore pleased to announce the appointment of Danie Meintjes as a non-executive director of Spire upon Closing.

The relationship agreement entered into by Cinven and Spire in July 2014 will terminate on or before Closing. Cinven's residual shareholding in Spire amounts to 33,890,326 ordinary shares, representing approximately 8.4 per cent. of the issued share capital of Spire. Cinven's residual shareholding in Spire remains subject to the existing lock-up agreement. Following the acquisition of the Shares, Remgro has agreed to adhere to the terms of the Cinven lock-up agreement.

Mediclinic and Remgro confirm that they have no current intention of making an offer for the whole of Spire. As a result of this announcement, Mediclinic and Remgro will be bound by the restrictions contained in Rule 2.8 of the UK City Code on Takeovers and Mergers (the "Code"). In summary, these restrictions prohibit Mediclinic and Remgro from making an offer for Spire (or from acquiring further shares that would give rise to an obligation to make an offer for Spire) within the next six months following the date of this announcement, other than with the consent of the Takeover Panel or in the circumstances described in Note 2 to Rule 2.8 of the Code (that is, with the agreement of Spire's board, if a third party announces a firm intention to make an offer for Spire, if Spire announces a "whitewash" proposal or reverse takeover, or if the Takeover Panel determines that there has been a material change of circumstances). This statement is made with the consent of Mediclinic and Remgro.

There remains no other information required to be disclosed under paragraph 9.6.13R of the Listing Rules in connection with the above appointment.

Enquiries:

Spire Healthcare Group plc
Antony Mannion, Investor Relations Director	[phone]
Simon Gordon, Chief Financial Officer	[phone]
Mediclinic International Limited
Danie Meintjes, Chief Executive Officer	[phone]
HSBC Bank plc (Financial Adviser to Spire)
Philip Noblet	[phone]
James Simpson
Keith Welch
Maitland (Communications Adviser to Spire)
Neil Bennett	[phone]
Tom Eckersley
Rand Merchant Bank (Financial Adviser to Remgro and Mediclinic)
Paul Roelofse	[phone]
Morgan Stanley & Co. International plc (Financial Adviser to Mediclinic)
Matthew Jarman	[phone]

A copy of this announcement will be available on both Spire's and Mediclinic's websites at: http://investors.spirehealthcare.com/, http://www.mediclinic.com/ir/. The content of the respective websites is not incorporated into and does not form part of this announcement.

HSBC Bank plc, which is authorised by the Prudential Regulation Authority and regulated in the United Kingdom by the Financial Conduct Authority and the Prudential Regulation Authority, is acting as financial adviser to Spire and for no-one else in connection with the subject matter of this announcement and will not be responsible to anyone other than Spire for providing the protections afforded to its clients or for providing advice in connection with the subject matter of this announcement.

Rand Merchant Bank, a division of FirstRand Bank Limited ("RMB") is acting as financial adviser to Remgro and Mediclinic and no one else in connection with the matters referred to in this announcement. In connection with such matters, RMB, its affiliates and its and their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to any other person other than Remgro and Mediclinic for providing the protections afforded to their clients or for providing advice in connection with the contents of this announcement or any other matter referred to herein.

Morgan Stanley & Co. International plc ("Morgan Stanley") is acting as financial adviser to Mediclinic and no one else in connection with the matters referred to in this announcement. In connection with such matters, Morgan Stanley, its affiliates (including without limitation Morgan Stanley South Africa (Pty) Limited) and its and their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to any other person other than Mediclinic for providing the protections afforded to their clients or for providing advice in connection with the contents of this announcement or any other matter referred to herein.

Notes to editors:

About Spire

Spire is a leading independent hospital group in the United Kingdom, with 39 hospitals, 13 clinics and 1 radiotherapy cancer centre across England, Wales and Scotland. The group delivered tailored, personalised care to more than 260,000 in-patients and daycase patients in 2014, and (outside the NHS) is the leading provider by volume of knee and hip operations in the United Kingdom.

Spire offers in-patient/daycase procedures in areas including orthopaedics, gynaecology, cardiology, neurology, oncology and general surgery and also diagnostic services including imaging and pathology. The group also offers out-patient services, such as consulting, minor procedures, treatments, health checks and physiotherapy.

About Mediclinic

Mediclinic is a private hospital group with three operating platforms in Southern Africa (South Africa and Namibia), Switzerland and the United Arab Emirates. Its core purpose is to enhance the quality of life of patients by providing cost effective acute care specialised healthcare services.

Mediclinic Southern Africa operates 49 acute care private hospitals throughout South Africa and three in Namibia with 7,885 beds in total; Hirslanden operates 16 acute care private hospitals with 1,655 beds and three primary care outpatient clinics in Switzerland; and Mediclinic Middle East operates two hospitals and eight clinics in Dubai, United Arab Emirates and two clinics in Abu Dhabi with 382 beds in total.

Most specialist disciplines are available at the group's hospitals, which are supported by more than 27,600 staff members - with Mediclinic Southern Africa employing more than 16,500, Hirslanden more than 8,700 and Mediclinic Middle East more than 2,400 employees.

About Danie Meintjes

Danie Meintjes is the CEO of Mediclinic. He joined the group in 1985 and was appointed in 1996 as a director of the company. In 2006, he was seconded to Dubai and was appointed as

the CEO of Mediclinic Middle East in 2007. He has been the company's CEO since April 2010.

Cinven

For purposes of this statement, "Cinven" means, as the context requires, Cinven Group Limited, Cinven Partners LLP, Cinven (Luxco1) S.A., Cinven Limited, Cinven Capital Management (V) General Partner Limited and their respective associates (as defined in the Companies Act 2006) and/or funds managed or advised by any of the foregoing.

 

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