LONDON: Hospital group Mediclinic is getting a toehold in the UK private healthcare market through a deal that involves itself, its major shareholder Remgro and UK-listed group Spire Healthcare in which it will end up with a 29.9% share. Joining me now on the line is Danie Meintjes, CEO of Mediclinic.
Danie, before we get into the rationale of the deal, can you explain how it is that the deal has been structured, that Remgro Jersey ends up buying the stake and then effectively selling it to Mediclinic…why have you organised it this way?
We started to negotiate with them via Remgro. We knew that while we jumped through all the hoops to get all the approvals in line, to get regulatory approvals from the Reserve Bank, etcetera would just simply take too long. Remgro has got a strong balance sheet, they had the excess cash, and they could get money from the banks quickly, so it was purely just to facilitate the timeline of the execution.
Okay, but having said all that, if you calculate, and I don’t know if I’ve miscalculated, but what Remgro is going to pay for that 29.9% stake and what Mediclinic will pay Remgro, there seems to be that Remgro is taking some sort of cut. It’s not huge but it is a couple of tens of millions of pounds…is that the case that Remgro actually ends up taking a fee from this?
They will and its more, it’s a facilitation fee for the execution using their balance sheet, putting it together, it’s very fair and even lower than market-related fee, yes. But they will definitely get paid for using their balance sheet and putting it all together.
So you think it’s fair that they do take a cut even though they are a big shareholder of yours?
I don’t think you must frame it as taking a cut, they get remunerated for executing this and compared to market fees, and it’s a very fair fee.
All right. So before we get to the rationale, Mediclinic is going to initiate a rights offer…you’re going to raise R10bn…R8.6bn of which will go towards Remgro for paying for the stake, and then you’re left with R1.4bn for general purposes. Are you quite confident that your shareholders, aside from Remgro, will back the rights offer?
DM: Yes, Remgro has already committed to back it and they will follow their rights for their 41.3% of the shares and the share price was coming at a discount as you know, R90…so I’ve got no reason to believe that shareholders will not follow their rights. But Remgro is fully underwriting the rest of the offer, so if anybody, any shareholder doesn’t take it up then Remgro will take it up.
