Remgro, Mediclinic batten down the hatches

Sharon Schooling, MD at STI Consulting, (a corporate communications company), speaking on behalf of Mediclinic told AxessHealth, “It’s for Remgro to make comment on Competition Commission conditions. It’s not for Mediclinic in its current guise to be commenting on that.”

Remgro’s Investment Relations executive, Luanda Zimgitwe, however responded, “We politely decline to comment. Mediclinic is best placed to comment and there are some restrictions from a UK take over regulations point that they will be best placed to navigate.”

When told that Mediclinic had said virtually the same thing and that this made for poor media optics on the R82,4 billion deal, Zimgitwe ‘apologised, for the frustration,’ adding, “the regulatory restrictions are not something we have an option about unfortunately.”

AxessHealth put several major conflict-of interest, supply and demand-side and cross-company information sharing concerns expressed by health economist, Professor Alex van den Heever and Section 27, to both parties after the Commission approved the deal, having made several ‘confidential conditions.’

Among the objector’s top reservations are Remgro’s shares in Momentum Metropolitan Holdings and Discovery and how they could potentially manipulate the market in favour of maximising overall profits. The Competitions Commission approved the deal subject to the following publicly declared conditions: A moratorium on retrenchments, the creation of an employee share ownership scheme, a commitment to procure from local black-owned and emerging businesses over the next five years, and the funding of skills development.

The watchdog also wants a commitment from Mediclinic to assist in relieving the public healthcare sector backlog of surgeries by performing 1 000 pro bono surgeries over the next five years. When it was put to Schooling that Mediclinic already had several such philanthropic ventures in the state sector and that expanding on this would ‘improve optics,’ she nevertheless declined further comment.

However, Michell le Roux, legal spokesperson for the consortium said Remgro held only non-controlling interests of 7.7% in Discovery and 8.6% in MMH, and that Remgro was not entitled to appoint any directors on those boards, nor was it able to access any confidential information.

“The relationship with Discovery or MMH is not one that could lead to any of the kinds of concerns mentioned in the (activist) submissions,” said Le Roux, adding that the company only got publicly available information from the JSE.

Mediclinic and the Remgro-led consortium, reached a final agreement on the terms of the takeover bid which had been on the cards since May last year.

In a statement late last year, Mediclinic said its directors, advised by Morgan Stanley and UBS as to the financial terms of the acquisition, considered them to be ‘fair and reasonable.”

The Mediclinic directors recommended unanimously that scheme shareholders vote in favour of the scheme.

When the consortium first approached Mediclinic, it offered shareholders 463 pence (R89) per share. Mediclinic rejected it, saying it significantly undervalued the hospital group’s future prospects.

The new offer presented a premium of approximately 50% to Mediclinic’s average volume-weighted share price of 337 pence in the past six months and roughly a 35% premium to the group’s closing share price on 25 May 2022, the day before the initial offer.

However, this is still only 9% more than the initial offer that the company rejected, and some shareholders – including Sasfin Securities’ deputy chairperson, David Shapiro – maintained that it was too low.

The Mediclinic group, which Remgro founded in the 1980s, operates 74 hospitals, five subacute hospitals, two mental health facilities, 20-day clinics and 22 outpatient clinics in SA, Namibia, Switzerland and the Middle East. Mediclinic also holds a 29.7% interest in UK-based private healthcare group Spire Healthcare, which is listed on the London Stock Exchange.