It took a bit of sweet talk, but the fair maiden is eventually starting to smile at the attractive suitor. It seems likely that the Remgro consortium will make a formal offer to purchase 100% of Mediclinic’s shares.
After the Mediclinic board of directors announced that it would support the latest bid of £5.04 per Mediclinic share – it came to light that Remgro had come with no less than three offers since the first one was rejected by Mediclinic directors.
The only big hurdle will be to convince minority shareholders that it is a good idea to cash in their investment in the growing Mediclinic group now.
Shareholders in SA will probably be happy with the latest offer.
Not only is the offer significantly higher than the first offer of £3.73, the rand has weakened quite a bit against the British pound to make it even more attractive in rand terms.
Mediclinic noted in a announcement that the latest offer of £5.04 per share is nearly 35% higher than the first offer and that the latest offer represents a premium of around 50% to the average volume weighted share price during the six months before Mediclinic received the first offer.
Share price surge
Since the first offer, the rand has declined from R19.80 per pound sterling to R20.08, adding a few percentage points to shareholders’ profit. Since 25 May, Mediclinic’s share price has increased by around 32% from slightly above R72 to more than R95 after the market heard about the latest offer.
The group’s share price has now hit a 52-week high.
The new offer is equal to R101.20 at the current exchange rate. The share is currently trading some 40% higher than the R68 at the start of the year.
While the announcements still talk about a “possible cash offer” by the consortium comprising Remgro and MSC Mediterranean Shipping Company SA (acting through its wholly owned subsidiary SAS Shipping Agencies Services Sàrl), it will be surprising if the transaction does not go ahead.
“It looks like a done deal,” says Stephen Meintjes, head of research at Momentum Securities.
“It only remains to convince shareholders to accept the offer… It looks like a good offer, much better than the first,” he adds, noting that this is probably the final offer, seeing as Mediclinic’s board of directors indicated that it supports the offer.
“It raises an interesting question: How much of the total offer will Remgro contribute and how much will the shipping company pay?” says Meintjes.
This question will only be answered in a few weeks when the consortium tables its formal offer, with the answer disclosing Remgro’s final shareholding in Mediclinic.
It is safe to assume that Remgro will emerge as the controlling shareholder as it already owns around 45% of Mediclinic.
Mediclinic says in its announcement to shareholders that the board of directors (excluding Remgro’s representative of the board) remains confident in Mediclinic’s strategic direction and long-term prospects as an integrated healthcare partner.
“However, having weighed all relevant factors, including the current macroeconomic conditions, the independent board is of the view that the near-term value realisation of the latest proposal provides Mediclinic’s shareholders an attractive alternative to the group continuing as an independent company.”
“Therefore, should a firm offer be made on the financial terms of the latest proposal, the independent board would be minded to recommend it to Mediclinic shareholders, subject to the agreement of other customary terms and conditions,” the announcement states.
Put up or shut up
The consortium has until the afternoon of 4 August to make a formal bid, or announce that it will not make a bid. “Put up or Shut up” by this date, says Mediclinic.
In terms of the rules and regulations of the London Stock Exchange (LSE), the consortium had until Thursday, 7 July, to make a formal offer in terms of its first bid or offer a new proposal. The new offer effectively extended the deadline.
Mediclinic says that the deadline can be further extended by Mediclinic with the consent of the LSE’s Takeover Panel.
It also warns shareholders that there can be no certainty that any offer will be made and that the consortium reserves the right to vary the form of consideration at its discretion and/or introduce other forms of consideration, such as securities in substitution for all or part of the cash consideration.
It also notes that the consortium reserves the right to make an offer for Mediclinic at any time at a lower value or on less favourable terms, under certain circumstances.
As was the case with the first offer, the latest offer includes the final dividend of 3 pence declared in respect of the financial year to end March 2022.
The timing of the payment of the dividend and the timing of the transaction will determine whether shareholders first receive the dividend and then get £5.01 for their shares, or whether Remgro buys the shares inclusive of the dividend at £5.04 per shares.