Don Agro International has proposed to acquire a 99.99% stake in 812 Capital LLC and 11.5% of the shares in Centre for Innovative Medical Technologies (CIMT) for 3.04 billion Russian rubles ($43.7 million).
Both 812 Capital and the Centre for Innovative Medical Technologies are also known as the “target group”. 812 Capital is the holding company for the group, a federal network of oncology clinics operating under the Euroonco brand in the Russian cities of Moscow, Saint Petersburg, Nizhny Novgorod and Krasnodar. It provides a full range of cancer diagnostics and treatment services including surgical interventions of any complexity and all types of antitumor and palliative treatment.
On Sept 6, Don Agro’s wholly-owned subsidiary, JSC Tetra, signed agreements with the sellers Khvicha Akubardia and Aleksander Sviridov. Akubardia owns about 70.01% of the shares in 812 Capital and 10% of the shares in CIMT. Sviridov owns about 20% of the shares in 812 Capital and 1.5% of the shares in CIMT.
The agreements are in relation to JSC Tetra’s proposed acquisition of 1% of 812 Capital’s shares, which constitutes as a non-discloseable transaction under Chapter 10 of the listing rules. The agreements also pertain to the remaining 98.99% stake in 812 Capital where key terms will be set out for the acquisition of 89.01% of shares in 812 Capital while JSC Tetra will be granted an irrevocable call option to purchase 9.98% of the shares in the same company. The parties have also signed a share pledge agreement to serve as security for the completion of the 89.01% stake.
Another agreement was signed to determine the key terms for the acquisition of the 11.5% shares in CIMT.
The acquisitions constitute a “very substantial acquisition” by Don Agro defined under chapter 10 of the Catalist rules.
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As at Sept 12, 812 Capital has an issued share capital of 10,000 rubles while CIMT has an issued share capital of 49.0 million rubles.
Based on the target group’s unaudited accounts, the group’s book value and net tangible asset (NTA) value for the FY2023 ended Dec 31, 2023, is 77.7 million rubles. The net profits attributable to the target group for the same year is around 497.6 million rubles.
According to Don Agro, the target group’s business will provide the former with the “necessary recurrent business activities” moving forward.
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Don Agro is currently defined as a “cash company” under Rule 1017 of the Catalist rules after it disposed of its operating agricultural business and assets. Under the same rule, an issuer will be removed from the Singapore Exchange S68 (SGX) if its unable to meet the requirements for a new listing within 12 months from when it became a cash company. The current proposed acquisition is said to meet the requirements for a new listing.
Furthermore, the private healthcare market in the Commonwealth of Independent States (CIS), especially in Russia, is reportedly experiencing “dynamic growth and development”.
“According to Federal State Statistics Service of Russia, the volume of services provided by private healthcare in Russia increased by 11.2% y-o-y and reached 1.36 trillion rubles in 2023,” says Don Agro in its Sept 12 filing.
“State funding on medicine amounted to at least 3.96 trillion rubles in the same period. The most demanded medical services were laboratory tests, consultations with general practitioners, and diagnostic tests (ultrasound diagnostics and others),” it adds.
In addition, the increase in cancer morbidity reflects the “greater availability of diagnostic services and the corresponding improvements in quality”. For instance, cancer was detected in around 50.5% cases at the first and second stages in 2012. This figure improved to 57.9% in 2021, says Don Agro.
Of the total consideration sum, 30 million rubles will pay for the 1% stake in 812 Capital. Another 2.73 billion rubles will pay for the 89.01% stake while 160 million rubles will pay for the remaining 9.98% stake. The CIMT stake comes up to 120 million rubles.
The consideration for the 1% stake will be paid in full in the form of letters of credit issued by PJSC Sberbank Moscow. The consideration for the 89.01% stake will be paid in three waves, first through advance payments via letters of credit, then wire transfers. The consideration for the 9.98% stake will also be paid via wire transfer while the consideration for the CIMT stake will be paid in advance payments in the form of letters of credit issued by PJSC Sberbank Moscow.
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The advance payments are refundable and will be repaid by the vendors, Akubardia and Sviridov, in favour of JSC Tetra within five business days from the date of termination of the balance stake preliminary agreement and the CIMT stake preliminary agreement signed on Sept 6.
On a pro forma basis, Don Agro’s NTA per share would’ve been at 66.29 cents after the disposals and proposed acquisitions compared to 94.61 cents after the disposals and before the acquisitions. The company’s NTA per share was 38.12 cents before the disposals and acquisitions.
Earnings per share (EPS) on a pro forma basis would have improved to 11.59 cents after the disposals and proposed acquisitions. EPS would have been at 6.39 cents after the disposals and before the acquisitions, but still better than the actual loss per share of 2.65 cents before the disposals and acquisitions.
After the disposals and acquisitions, Don Agro’s gearing would be at 137.9% compared to 10.31% before both transactions.
Shares in Don Agro last traded at 21 cents before its trading halt on the morning of Sept 9.
