Life with­out debt

Trans­ac­tion has ma­jor im­pli­ca­tions for debt and div­i­dends

Finweek English Edition - - Insight -

IT’S EASY TO SEE the value of one good in­vest­ment when look­ing at the ar­range­ments struck by em­pow­er­ment com­pany Brim­stone In­vest­ment Cor­po­ra­tion about its 21,5% stake in soon-to-be-listed pri­vate hos­pi­tal group Life Health­care. To sum­marise: Brim­stone will un­bun­dle the biggest chunk of its Life stake to share­hold­ers, re­tain a small strate­gic share­hold­ing of 2,98% and cash in a size­able por­tion of its hold­ing in a pre-list­ing share buy­back ex­er­cise. This pretty much cov­ers the op­tions open to Brim­stone and should pre­clude too much carp­ing from share­hold­ers.

While Brim­stone’s share­hold­ers will no doubt be de­lighted to lay their hands on what could be fairly scarce Life scrip, the most in­trigu­ing as­pect of the deal is the longer term ef­fect the deal will have on the em­pow­er­ment com­pany. Ba­si­cally, Brim­stone will cash out at least R750m (net of STC) by par­tic­i­pat­ing in Life’s pre-list­ing share buy­back. The price Brim­stone re­ceives can’t yet be quan­ti­fied as the buy­back is part of a book-build­ing aimed at se­cur­ing suf­fi­cient share­holder spread in Life. The R750m es­ti­ma­tion is based on Brim­stone’s last stated val­u­a­tion of Life, which was set at R2,8bn.

But Brim­stone’s par­tic­i­pa­tion in the buy­back/book­build­ing process isn’t a given. The cir­cu­lar to share­hold­ers stresses the book-build price is cur­rently un­cer­tain and asks share­hold­ers to give Brim­stone’s di­rec­tors “the author­ity

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