Medscheme holding company set for JSE through deal potentially worth R900m

Medscheme is set to become the only black-owned healthcare administration company listed on the JSE with the announcement this week of plans to reverse list its holding company, Lethimvula, in a transaction potentially worth up to R900-million.

JSE-listed AfroCentric Investment Corporation, a broad-based black empowered diversified investment holding company, proposes to acquire a 63,2% interest in Lethimvula Investments Limited, which holds 100% of healthcare administrators Medscheme Limited and Rowan Angel Limited.

The investment committee of AfroCentric comprises Nomhle Canca, Brian Joffe, Meyer Kahn and Motty Sacks (pictured) Key figures in Lethimvula are chairperson Dr Anna Mokgokong (pictured) entrepreneurr Joe Madungandaba and Dewald Dempers.

Mokgokong says the transaction with AfroCentric will strengthen Lethimvula’s position in the sector and boost its drive to improve access to affordable healthcare by all.

“The healthcare sector needs continued investment and innovation to provide our broader society with sustainable access to healthcare. We anticipate that Medscheme’s existing initiatives and discussions with other companies will be enhanced through Lethimvula’s relationship with AfroCentric,” says Mokgokong.

She adds that the logic of the transaction with AfroCentric is sound from both business and empowerment perspectives.

“Lethimvula has made good progress and paid dividends earlier this year and in 2007. This deal will really raise the profile of Lethimvula because AfroCentric is already listed. Our capacity to raise funds in support of Lethimvula’s further growth plans, in particular the exciting plans for diversified financial services, will also be simplified through a streamlined and consolidated corporate structure.”

Mokgokong says liquidity and tradability will be improved for Lethimvula’s approximately 8000 shareholders who can currently trade their Lethimvula shares only in the over-the-counter (OTC) market. “This ability to unlock value for shareholders and provide an entry mechanism for new shareholders should be a key consideration as empowerment transactions undertaken in recent years begin to mature.”

In addition to becoming part of a larger and diversified group, Mokgokong expects Lethimvula to benefit from the guidance of the an eminent AfroCentric board of directors who, apart from their own experience, reveal a demonstrable commitment to empowerment and transformation. “This kind of high-level association will be an important aspect of advancing Lethimvula’s growth strategy,” she says.

For AfroCentric, Sacks says: “Along with the expected economic benefits, this acquisition fits squarely in the investment strategy of AfroCentric to facilitate and extend participation by BEE shareholders in successful and prestigious traditionally white-owned businesses. The transaction with Lethimvula is core to this strategy and will place a value on AfroCentric in excess of R1-billion.

“AfroCentric was founded to substantially provide mentorship, direction and high-level practical support in the acquisition of significant minority or controlling stakes in companies seeking BEE participation and representation,” says Sacks.

He adds that AfroCentric is extremely satisfied with the terms of the transaction and the fact that the vendors will substantially remain as shareholders and management. “AfroCentric seeks to invest in businesses that are well run with great prospects. Given the talent of Lethimvula and Medscheme management, including Lethimvula’s financial services agenda, Lethimvula comfortably fits that profile,” says Sacks.

Earlier this year AfroCentric acquired a 34% interest in Jasco Electronics and simultaneously subscribed for R100-million of preference shares in a subsidiary of Jasco to facilitate the acquisition by Jasco of 51% of the shares in Malesela Taihan Technologies (Pty) Limited, a leading manufacturer of a wide range of electric and fibre optic cable. Afro Centric also has cooperation agreements with Rio Tinto on several exploration and prospecting projects in South Africa.

The purchase price for the subject sale shares in Lethimvula will comprise a first tranche of R341,4-million and a second tranche of a maximum of R227,6-million. The sellers of the Lethimvula sale shares have elected to receive the first tranche in the form of shares in AfroCentric at R2.60 a share to the value of R215,1-million and R126,2-million in cash.

The second tranche becomes payable in AfroCentric shares in 2013, also at R2.60 a share, subject to Lethimvula returning average after tax profits for the three financial years from 2011 to 2013 of R180-million from all of its healthcare and financial services operating divisions.

Conditions of the transaction include, inter alia, approval by the board and shareholders of AfroCentric, the competition authorities (if required), the JSE and the Securities Regulation Panel (SRP).

Once the transaction’s conditions have been fulfilled, AfroCentric will extend the purchase offer to other shareholders of Lethimvula, as required by the SRP code on mergers and takeovers.