Dividend demand behind sale of Life UK business
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 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 the firms had to embark on a “reluctant seller strategy” to see through the multibillion-rand transaction.
“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,” WhartonHood said.
“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, 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.
It received net proceeds of R10bn after it settled international debt and transaction related costs, money which has been repatriated to SA.
The company has said it plans 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, such as Germany and Italy.
Wharton-Hood said concluding the sale of AMG was complex and time-consuming.
“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 team players.
“So, 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. The business will remain a key part of its growth strategy.
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 after the AMG deal 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.”