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The WAD Healthcare Assets Acquisition
On 1 August 2015 (“effective date”) AfroCentric concluded agreements governing the acquisition of 100% of the WAD
healthcare assets, being Pharmacy Direct Proprietary Limited, Curasana Wholesaler Proprietary Limited and Glen Eden
Trading 58 Proprietary Limited, from WAD Holdings Proprietary Limited, hereafter referred to as the WAD Healthcare Assets
acquisition. The principal enterprise, being Pharmacy Direct Proprietary Limited, is a designated service provider to a wide
range of South African medical aid schemes. The business supplies chronic medication under Prescribed Minimum Benefits
and normal chronic benefits to approximately 110 000 patients nationally. Pharmacy Direct was awarded a tender in terms
of which chronic medication is dispensed on behalf of Government to districts in seven (2016: five) of South Africa’s nine
provinces. The WAD Healthcare Assets acquisition has instilled positive synergies to the Group’s general value proposition
for all stakeholders, adding scale, enhancing marketing and distribution channels and positively positioning the Group for
accelerated growth. The purchase consideration for the WAD Healthcare Assets acquisition was 86.5 million AfroCentric
shares as well as 26.2 million contingent shares being the maximum number of AfroCentric shares that management believed
would be issued due to the attainment of certain profit levels in Glen Eden Trading 58 Proprietary Limited in the foreseeable
future. In the current financial year the profit levels have been exceeded and the number of contingent shares has increased
to 31.366 million. WAD Holdings Proprietary Limited has now elected to receive the contingent consideration in cash and
not shares.
The WAD Healthcare Assets acquisition was accounted for using the purchase price method of accounting, which requires that
the assets and liabilities of Pharmacy Direct Proprietary Limited, Curasana Wholesaler Proprietary Limited and Glen Eden
Trading 58 Proprietary Limited be measured at fair value as at 1 August 2015.
| |
Total
June 2016
R’000 |
|
| Fair value of 100% net asset value at acquisition |
106 529 |
|
| Property and equipment |
25 213 |
|
| Loans to shareholders |
20 |
|
| Inventories |
60 915 |
|
| Current tax receivable |
288 |
|
| Trade and other receivables |
100 414 |
|
| Cash and cash equivalents |
41 747 |
|
| Intangible assets: customer relationships |
89 485 |
|
| Current tax payable |
(2 911) |
|
| Trade and other payables |
(184 347) |
|
| Deferred tax liability |
(24 295) |
|
| Consideration for the purchase of 100% of net asset value |
580 483 |
|
| Goodwill arising from acquisition* |
473 954 |
|
* The goodwill arises from integrated synergies that are established through the acquisition of the WAD Healthcare Assets.
Below is the breakdown of the consideration paid for the WAD Healthcare Assets acquisition:
| No of shares (millions) |
Share price
R |
Total value
R |
|
| Share issue for Pharmacy Direct Proprietary Limited and Curasana Wholesaler |
|
|
|
| Proprietary Limited (tranche 1)1 |
5.153 |
347 136 |
|
| Glen Eden Trading 58 Proprietary Limited (tranche 1) |
5.153 |
98 453 |
|
| Glen Eden Trading 58 Proprietary Limited (tranche 2)2 |
5.153 |
134 894 |
|
| |
|
580 483 |
|
|
|
| 1 |
In the case of Curasana Wholesaler Proprietary Limited and Pharmacy Direct Proprietary Limited it is management’s view that certain
government contracts will not be achieved by these entities hence additional shares will not be issued, apart from the shares that were
already issued in tranche 1. |
| 2 |
Under the contingent consideration arrangement, AfroCentric Investment Corporation Limited was required to issue Glen Eden Trading 58
Proprietary Limited an additional 26 192 902 shares based on management’s best estimate as per the Acquisition of Shares agreement.
R134.9 million was the estimated fair value of this obligation at June 2016 year-end. |
| |
During the current year based on the profits reached, the number of shares is now 31 366 977 and the fair value is R194.4 million.
WAD Holdings Proprietary Limited has now elected to receive the contingent consideration in cash and not shares. If the share price
increased by 10% the contingent consideration would decrease by R19.4 million in profit and loss and if the share price decreased by 10%
the contingent consideration would increase by R19.4 million in profit and loss. Refer to Note 9.8 for further details. |
| 3 |
This is the AfroCentric Investment Corporation Limited share price as at the effective date in 2015. |
The Wellness Odyssey Acquisition (Post Balance Sheet Acquisition)
On 1 July 2017 (“effective date”) AfroCentric concluded agreements governing the acquisition of 100% of Wellness Odyssey
Proprietary Limited. Wellness Odyssey Proprietary Limited is a service provider for corporate wellness days – raising
awareness and enhancing preventative care to the advantage of the medical scheme, employer groups and participating
members. The Group is determined to pursue partnerships, acquisitions and mergers in order to drive toward value chain
optimisation and this acquisition bears testament to this. The purchase consideration for Wellness Odyssey Proprietary
Limited is R38 million in cash consideration.
The Wellness Odyssey Proprietary Limited will be accounted for using the purchase price method of accounting, which
requires that the assets and liabilities of Wellness Odyssey Proprietary Limited be measured at fair value as at 1 July 2017.
The amounts disclosed below are provisional.
Wellness Odyssey acquisition
| |
| Fair value of 100% net asset value at acquisition (assets) |
4 473 |
|
| Property and equipment |
274 |
|
| Trade and other receivables |
3 565 |
|
| Cash and cash equivalents |
2 099 |
|
| Deferred tax asset |
55 |
|
| Trade and other payables |
(1 315) |
|
| Provisions |
(205) |
|
| Consideration for the purchase of 100% of net asset value |
38 000 |
|
| Goodwill arising from acquisition* |
33 527 |
|
|
* The goodwill arises from integrated synergies that are established through the acquisition of Wellness Odyssey. |