The CEO of Life Healthcare, one of SA’s largest private hospital groups, says its recent R21bn sale of its UK-based business Alliance Medical Group (AMG) to Icon Infrastructure was agitated for by shareholders who wanted to get dividend payouts.
Peter Wharton-Hood told corporate and investment bank Rand Merchant Bank (RMB) in a podcast last week that the company had to embark on a “reluctant seller strategy” to see the multibillion-rand transaction through.
“It [AMG] was a great asset. But we were not the right owner of the asset. Our shareholder base was really saying to us that Icon will be a better player to hold the asset because they can take their time and look for longer date returns,” Wharton-Hood said, stressing that the transaction was beneficial to shareholders.
“As a listed healthcare company in SA, our shareholders were far more keen to see shorter-term dividend payouts. So, in that particular context we responded to the pressure that the shareholders were placing on us and in the context of finding a purchaser, we never went out to sell it. We canvassed the market quietly and we managed to extract from the market an interested buyer.”
RMB advised on the deal, which was concluded three weeks ago. Life Healthcare shareholders include Sanlam Investment Managers, Old Mutual Investment Group and Stanlib.
Life Healthcare received a tidy £845.9m for the transaction, nearly its market cap of R26bn.
The group received net proceeds of R10bn after it settled international debt and provided for transaction-related costs, money which has been repatriated to SA.
Increasing revenue
The company has said it planned to “return the majority of the net proceeds to shareholders, while retaining a portion ... for specific growth projects”.
Life Healthcare acquired AMG in 2016 for about £553m, increasing its revenue outside SA from 7% to 29% at the time. AMG, a provider of molecular and diagnostic imaging services, operates in 10 European countries, including Germany and Italy.
Wharton-Hood said concluding the sale of AMG was complex and time-consuming.
“It was complicated. It was multijurisdictional with multiple stakeholder groupings to appease. This always makes it difficult from the outset. In addition we had a highly complicated regulatory regime across multiple jurisdictions [which] meant it had to be meticulously planned,” he said.
“We carefully chose our advisers in different jurisdictions and each one of them played to their strengths. We were lucky that they were not only competent, but were team players. So, in the context of pulling the deal together, we were dealing with professional advisers that not only wanted to get the deal done in the best interest of Life Healthcare and its shareholders, but in a way that was pleasant to work with.”
Life Healthcare’s Life Molecular Imaging (LMI) was not included in the transaction, with the group saying the business will remain a key part of its growth strategy.
Renal dialysis
The group’s deal to acquire German healthcare company Fresenius Medical Care’s renal dialysis clinics in Southern Africa is closer to completion after the Competition Commission this month recommended it be approved with conditions.
The deal, first announced in March 2023, will add about 51 renal dialysis clinics to Life Healthcare’s already sizeable network. The clinics will be integrated into Life Healthcare’s renal care programme. The company’s core business is 66 private hospitals it operates in Southern Africa.
Wharton-Hood said that after the AMG transaction the group would pursue other growth initiatives and strengthen its position in Southern Africa and was looking at opportunities in the US.
“Life Healthcare 2.0 defines itself principally in the jurisdiction of Southern Africa, where our acute hospitals will dominate the business model. In addition, we have growth opportunities in Southern Africa in the spheres of radiology, nuclear medicine, mental health and some others which we will disclose [later],” he said.
“And internationally, LMI presents Life Healthcare with the opportunity to develop in some sophisticated markets. We have arrangements in about 47 countries around the world to sell Neuraceq. But a major development would take place primarily in the US. We will watch developments closely and grow the business accordingly.”
Neuraceq is used to detect the accumulation of amyloid proteins in the brain that are considered a major cause of Alzheimer’s disease.
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