- The Company’s investment policy is to acquire commercially viable healthcare assets and will only consider investment opportunities in South Africa. Investments may be by way of purchasing quoted and unquoted shares in appropriate companies, outright acquisition or by the acquisition of assets, including the intellectual property, of a relevant business, or by entering into partnerships, joint venture arrangements orco-investments.
- The Company may co-invest with the Razorite Healthcare and Rehabilitation Fund or other investors and may invest solely if appropriate and meets RH Bophelo’s investment criterion.
- The Company may acquire the whole or part of a company or project (which in the case of an investment in a company may be private or listed) and such investments may constitute a minority or majority stake in the Company or project in question. The Company may be either an active or passive investor depending on the nature of the individual investments. The Company will assess each opportunity on its merits and, whilst the following are not prescriptive, the Company will apply two guiding principles as part of its decision-making process (majority versus minority):
- Majority stakes will be acquired for turnaround opportunities and/or where the Company believes that they will have to play an active role in the management of the acquired entity. RH Bophelo will seek synergies that reduce costs, drive efficiencies to deliver growth and drive earnings; and
- Minority stakes will be acquired for opportunities in which the Company is satisfied with the existing management team’s competence and ability to drive growth, as well as deliver value and identify that there is a clear path to control.
- The Company will place no minimum or maximum limit on the length of time that any investment may be held. There will be no limit on the number of investments to be made.
- The Company may offer new ‘A’ Ordinary Shares by way of consideration, as well as cash in making investments. The Company may, in appropriate circumstances, issue debt securities or otherwise borrow money to complete an investment.
- The Company will actively manage the investment life cycle of investee companies to maximise the financial returns through appropriate exit mechanisms at maturity of investments.
- It is envisaged, that to the extent that debt investments are used by the Company, these will mostly be self-liquidating through the repayment of capital, whilst equity investments will be realised at full market value through sale.
- In the case of investee companies with strong positive cash flow, active growth strategies will be pursued, or alternatively high dividend distributions in order to create annuity type income. In exceptional cases equity realisation may be by way of initial public offerings and listing of shares on the JSE.
- In addition to the use of its own resources, the Company will employ external financing as a source of capital. The Company will use borrowings to advance cash flows in order to increase overall returns. The Board will adopt policies from time to time to set limits on the extent of the Company’s borrowings. Interest rate movement risk will be mitigated by using inflation-linked rate loans or other hedging instruments. The implementation of such policies and the use of such instruments largely serves to make interest on borrowings a known and controlled expense. The Company will use borrowings to fund acquisitions on a case by case basis, and only where it is satisfied that the overall yield from a particular prospective acquisition is or will be greater than the cost of the borrowing required for that particular acquisition, or when the leveraging produces enhanced returns.
The targeted investments will meet the following criteria:
Consistent value orientation
The Company will actively seek out investments whereby the intrinsic value (such as replacement costs of the assets employed) and/or conservative market value is sufficiently higher than the transaction value of the securities being acquired.
Discounted price for controllable growth
Many of the Company’s equity investments will be in well-run companies primarily in need of a financing partner to pursue earnings growth initiatives, facilitate a recapitalisation, or avoid/solve current or impending balance sheet issues.
The Company will not be an active participant in traditional merger and acquisition auction processes. Rather, the firm will focus on a proactive sourcing process that seeks motivated sellers who are actively searching for, and in need of, a strategic financing partner.
Holistic, team-based approach
The Company will utilise a holistic, team-based approach pillared on a consistent investment process.
Control vs. passive investment
We take control of an entity if we believe that we can do a better job of managing and driving efficiencies. We take minority stakes when we are satisfied with existing management and they require only strategic and financial inputs.
Most participants in the corporate financing markets underwrite investments with a targeted duration of three to five years. Investors in the Company can access liquidity at any moment.
The Company offers management teams and investment partners of a differentiated view on time with potential holding periods beyond five years.