Johannesburg - Old Mutual Healthcare (OMH) has acquired Sizwe Medical Services, a wholly owned subsidiary of empowerment outfit Kwacha, in return for a 26 percent equity stake in OMH plus cash for Kwacha shareholders. The transaction will enable OMH to tender for the soon-to-be-launched government employees medical scheme.
OMH will also acquire 90 percent of Cheiron Heath Technologies as part of the deal. Cheiron provides managed care services to the 50 000-member Sizwe Medical Fund, the largest black-owned administrator in South Africa.
This will raise the black economic empowerment (BEE) shareholding in OMH to 36 percent after taking into account Old Mutual South Africa's R7.2 billion empowerment deal in April.
The deal also means that OMH has exceeded the BEE ownership requirement of 35 percent by 2010 as proposed by the healthcare sector charter. The transaction is subject to approval by the competition authorities. Kwacha was founded in 1976 by a group of 38 black doctors in Soweto.
Roddy Sparks, the managing director of Old Mutual South Africa, would not disclose the financial value of the transaction, saying Kwacha was a private company.
He was very pleased with the transaction because the 26 percent BEE shareholding was without debt. There was also a lock-in period of up to 2014 for Kwacha.
OMH said the merger would result in a total membership base of almost 245 000.
Thabiso Buku, the managing director of OMH, said the transaction would make it the fourth biggest in the healthcare sector in South Africa.
Sizwe Medical Services chairman and Kwacha chief executive Sam Tshabangu said the Sizwe Medical Fund was sitting at 40 percent reserves.
"We found that we cannot grow the scheme on our own. We believe the experience we will gain from such an established company will further enhance our administration capabilities to members."
Kwacha was also involved in one of the bigger BEE healthcare deals last year when medical aid administrator MX Health increased its empowerment shareholding to 62.18 percent.
The R60 million deal was funded by Investec Bank and saw Kwacha's stake in the company increase to 26.7 percent. Lengana Investments took a 25 percent shareholding and the largest slice of the pie went to Bathabile Holdings with 48.3 percent.
The MX Health deal was soon eclipsed by Thebe Healthcare with a 100 percent buyout of Forim and Alliance Pharmaceuticals.
Yvonne Motsisi, the chairman of the Black Healthcare Caucus, said the group welcomed any initiatives and transformation within the healthcare sector.
"The numerous deals coming through show that the targets set in the draft healthcare charter are not unachievable by 2014. One of the key challenges, however, is that funding vehicles need to come on board."