Old Mutual Healthcare and Kwacha, the holding company of 100% black-owned Sizwe Medical Services (SMS), on Tuesday announced the proposed merger of their businesses that will result in the health-care subsidiary of Old Mutual being 36% black-owned.
Speaking at a media briefing in Johannesburg, Thabiso Buku, MD of Old Mutual Healthcare, announced that Old Mutual Healthcare has reached agreement with Kwacha to acquire 100% of SMS and 90% of Cheiron Health Technologies (Cheiron) in exchange for a 26% equity stake in Old Mutual Healthcare, plus a cash amount.
The transaction is still subject to Competition Commission approval.
After taking into account the effect of the Old Mutual black economic empowerment (BEE) deal announced in April this year, the latest transaction means that Old Mutual Healthcare will exceed the 2010 black ownership requirement of 35% as proposed by the Healthcare Sector Charter released for public comment in July.
SMS, a wholly-owned subsidiary of Kwacha, administers the Sizwe Medical Fund with 55 000 members. It is the largest black-owned administrator in South Africa and has been in the health-care industry since 1978. Fellow Kwacha subsidiary Cheiron provides managed-care services to the Sizwe Medical Fund.
The merger will result in the Old Mutual Healthcare group having a total membership base of about 245 000, making it the fourth-largest health-care administrator in South Africa.
Buku says that in Kwacha, Old Mutual Healthcare has chosen a black empowerment partner that has a credible track record in the industry.
“Kwacha brings many valuable attributes to the table, including a strong management team, a powerful brand and established relationships with some big unions and corporates. It also has a strong presence in the Gauteng market.
“Together, Old Mutual Healthcare and Kwacha will be able to access market segments that each individual business could not have done as effectively on its own.”
Roddy Sparks, MD of Old Mutual South Africa, says the deal once again demonstrates Old Mutual’s commitment to value adding, broad-based transformation and meeting and exceeding the BEE targets set by business and the government.
Old Mutual Healthcare already exceeds the proposed 2014 Healthcare Sector Charter employment-equity targets of 70% black staff and 60% women staff members. The Old Mutual Healthcare workforce is currently 71% black and 69% women. These ratios will be further bolstered by the BEE transaction with SMS/Cheiron, whose combined workforce is 84% black and 78% women.
SMS chairperson and Kwacha CEO Dr Sam Tshabangu said he is proud to be partnering with a company of such a strong and stable reputation.
“We believe the experience we will gain from such an established company will further enhance our administration capabilities to members. It will also allow us to tap into Old Mutual Healthcare’s strong network of brokers and consultants, and access one of the best loyalty programmes in the local health-care industry.
“We had discussions with a number of partners, and of these, Old Mutual Healthcare was the most acceptable to the shareholders and fitted in best with our criteria. We are looking forward to a long and fruitful relationship with Old Mutual,” said Tshabangu.
Buku says the transaction will result in several synergies.
“These include distribution and finance capabilities, shared IT platforms and managed-care service offerings. These synergies will be beneficial to current clients of both companies as well as future clients.” — I-Net Bridge