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UPDATE 1-S.Africa's Life Healthcare to buy controlling stake in Britain's Alliance Medical

Wed 16th November, 2016 1:14pm
* Life Healthcare seeking growth in developed markets 
    * Alliance Medical has operations in Italy, Ireland 
    * Plans for rights issue dent share price 
 
 (Adds company comment, detail) 
    By TJ Strydom 
    JOHANNESBURG, Nov 16 (Reuters) - South Africa's No. 3 
private hospital firm Life Healthcare  LHCJ.J  will acquire 95 
percent of Britain's Alliance Medical, it said on Wednesday, but 
its shares fell sharply over its plans for a rights issue. 
    Seeking growth outside its home market, Life Healthcare will 
spend up to 10.4 billion rand ($727 million) in cash for the 
controlling stake in unlisted Alliance Medical, which also 
operates in Italy and Ireland. 
    South African private healthcare providers, which also 
include Mediclinic International  MDCM.L  and Netcare  NTCJ.J , 
are in a race to expand by making acquisitions in more developed 
markets as an anti-trust inquiry has constrained growth at home. 
    "In addition to investing in a growing developed market, the 
acquisition provides Life Healthcare an opportunity to diversify 
into attractive new geographies with a strong basket of 
currencies," the firm said in a statement. 
    Life Healthcare, which in September told Reuters it planned 
to pay up to $1 billion on a European acquisition.  urn:newsml:reuters.com:*:nL8N1BV1EQ 
    The firm said it will buy Alliance Medical -- a provider of 
molecular and diagnostic imaging services -- through a temporary 
loan from Barclays Plc  BARC.L   BGAJ.J  and South Africa's Rand 
Merchant Bank  RMHJ.J .  
    Life Healthcare would then undertake a rights issue at a 
later date to refinance the loan, it said. 
    Its stock fell as much as 6.7 percent, before recovering to 
trade 2.1 percent weaker at 32.69 rand by 1304 GMT. The bourse's 
All-share index  .JALSH  was up 0.9 percent. 
    "The shares are down purely because they have to raise some 
capital to fund it, and they seem to be paying quite a hefty 
multiple for it," said 36ONE Asset Management portfolio manager 
Evan Walker. 
    The Johannesburg-based company said it will pay an initial 
cash amount of 553 million pounds ($687 million) and a deferred 
amount of up to 40 million pounds depending on Alliance's 
financial performance in the year to end-March. 
    Alliance Medical's management will hold the 5 percent stake 
not acquired by Life Healthcare. 
    The entry into diagnostics is a natural part of its growth 
and diversification strategy, said Life Healthcare, which has 
over the past few years expanded into mental health, physical 
rehabilitation, renal dialysis and oncology. 
    ($1 = 14.3102 rand) 
    ($1 = 0.8055 pounds) 
 
 (Editing by James Macharia) 
 ((tj.strydom@thomsonreuters.com; +27 11 775 3150; Reuters 
Messaging: tj.strydom.thomsonreuters.com@reuters.net)) 
 
Keywords: ALLIANCEMEDICAL M&A/LIFE HEALTHCARE
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