The Company’s investment policy is to acquire commercially viable healthcare assets and to only consider investment opportunities in South Africa. Investments may be by way of:
- purchasing quoted and unquoted shares in appropriate companies;
- outright acquisition;
- by the acquisition of assets, including the intellectual property of a relevant business; and
- by entering into partnerships, joint venture arrangements or co-investments.
Although limited to South Africa, RH Bophelo will seek investment opportunities through strategic partnerships that will provide a reliable entry to the rest of the continent. Although limited to acquisitions that are cash flow positive or within 12 months to cash positive, RH Bophelo will seek investment opportunities through partnership with other funds, sponsoring innovative solutions that can make capital available in order to responsibly participate in new infrastructure.
The Company may co-invest with other Funds and may invest solely if appropriate and the RH Bophelo’s investment criteria are met. We may acquire the whole or part of a project or company (private or listed) and such investments may constitute a minority or majority stake in the company, or project in question.
RH Bophelo 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 it will have to
discharge a management company such as AHC, in the
management of the acquired entity. RH Bophelo will seek
synergies that reduce costs and drive efficiencies to deliver
growth and drive earnings. - 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.
RH Bophelo 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. To the extent that debt investments are used by the Company, it is envisaged that 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 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 serve to make interest on borrowings a known and controlled expense.
The Company will use borrowings to fund acquisitions on a caseby-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.
Acquisition Criteria
The targeted investments should 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.
Motivated sellers
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.
Time horizon
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.
