Life Healthcare of South Africa Raises $680 Million in Reduced Share Sale

Life Healthcare Group Holdings Ltd., a South African hospital owner whose initial public offering would have been the continent’s biggest in at least a decade, cut the size of its planned IPO by as much as 35 percent as sales worldwide suffer setbacks amid stock-market volatility.

Life Healthcare raised 5.26 billion rand ($680 million) from the sale, in an initial public offering at 13.50 rand per share, the bottom of its reduced price range, the company said in a statement today. That gives Johannesburg-based Life Healthcare a market value of 14 billion rand. The company had originally planned to raise as much as 8.04 billion rand.

At least 28 companies worldwide postponed or shelved share sales in May as concern Europe’s debt crisis will derail the global economic recovery sent the MSCI World Index of developed- market stocks down 9.9 percent. Ferrous Resources Ltd., the iron-ore company seeking funds for a Brazilian mine, this week halted its $400 million London offering citing “volatility” in the equity markets.

“Market circumstances at the moment can’t be ignored and investors are in no rush to get into the market -- even a good company needs to be at a good price,” said David Shapiro, who heads Sasfin Holdings Ltd.’s securities unit in Johannesburg. Shapiro said he won’t consider buying shares until after the stock starts trading.

‘No Surprise’

Life Healthcare yesterday reduced the amount of shares on offer to 390 million from 473 million and trimmed the price range to between 13.50 rand and 14.50 rand, from as much as 17 rand, according to a statement yesterday.

“It’s not surprising that there was more appetite for the stock at the lower end of its range,” Funeka Beja, a fund manager with Afena Capital in Cape Town said in an interview today. “The stock is still at a slight premium to its listed peers,” when comparing only the local operations, Beja said.

Life Healthcare’s price is at about 7.4 times earnings before interest, tax, depreciation and amortization for the year through September, based on company data. That compares with 9 times earnings for Netcare Ltd., the largest owner of private hospitals in South Africa, and 4 times for Medi-Clinic Corp. Ltd., the second-biggest publicly traded hospital owner, calculations by Bloomberg show. Medi-Clinic’s year end is March.

International investors bought 40 percent of the IPO stock, Chief Executive Officer Michael Flemming said in an interview from Johannesburg today.

‘Well Received’

“We wanted a reasonable stake from offshore because of the size of our book,” Flemming said. “It was not an ideal time to go to market because of the volatility globally and at a time like this one has to be cautious about the amount you are planning to list.” Even so, the company was “well received,” he said.

While management would not have taken the company to market “at any price,” Flemming said had they postponed the IPO, the next opportunity to list would probably have been November and he was not sure the company would have gained much by waiting six months.

Life Healthcare, which owns or operates 62 hospitals with about 8,100 beds, plans operations in India, Turkey and the countries neighboring South Africa, Flemming said in a May 18 interview.

Expansion

In South Africa, the company intends to expand facilities within existing hospitals and add new lines of business in “underserviced areas” such as mental health, kidney dialysis and frail care, Flemming said. The Johannesburg-based company on June 2 said it bought Bayview Private Hospital in Mossel Bay in South Africa’s Western Cape province. In the six months through March, revenue increased 11 percent to 4.2 billion rand from a year earlier. Ebitda advanced 14 percent to 982 million rand.

New York-based Morgan Stanley, Rand Merchant Bank in Johannesburg and Credit Suisse Group AG of Zurich managed the offering.

Life Healthcare’s IPO is the fifth-largest in Africa since at least 2001, Bloomberg data show. Maroc Telecom is the biggest, raising $903 million November 2004, followed by Starcomm Plc of Nigeria, which got $840 million in July 2008, Safaricom Ltd., East Africa’s biggest mobile-network operator, and Telecom Egypt.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew1@bloomberg.net

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