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(Alliance News) - Investment firm Georgia Capital PLC on Tuesday unveiled its recommended all-share offer for Georgia Healthcare Group PLC after talks were announced last month.
Healthcare services, pharmacy and medical insurance provider Georgia Healthcare's shareholders will receive one Georgia Capital share for every five Georgia Healthcare shares they hold. This represents a 9.4% premium to the average price of Georgia Healthcare's shares in the three months ended Monday this week.
Terms of the Georgia Capital acquisition are final, and cannot be increased. Should all Georgia Healthcare shareholders accept the offer, they will own around 16.15% of Georgia Capital's enlarged share capital.
Georgia Capital already holds 93.0 million Georgia Healthcare shares, approximately 70.63% of existing shares. It announced that takeover talks were ongoing on April 15.
Separately, Georgia Healthcare published its first quarter results, which showed a swing to a GEL7.5 million loss - about GBP1.9 million - in the three months ended March 31 from a GEL17.4 million profit the year before.
Although revenue increased to GEL260.1 million from GEL235.2 million, Georgia Healthcare's general and administrative expenses were higher, as were salaries and other employee benefits. On top of which, the firm incurred a GEL21.9 million loss on foreign currencies versus only a GEL148,000 loss the prior year.
No dividend will be recommended to shareholders at Georgia Healthcare's annual general meeting, though the "appropriate level" of dividend will be considered once the full economic impact from Covid-19 becomes more clear.
Georgia Healthcare has put various measures in place to help its balance sheet, including a review of its lease contracts with clinics and pharmacies, and a reduction in planned capital expenditures. The company has also obtained a new USD25 million loan facility and rwquested grace period for principal payments on some existing loans.
Chief Executive Nikoloz Gamkrelidze said: "During the first two months of the year, our performance was demonstrating our ability to capture the benefits of our recent investments and core business strategies. In March, however, the Covid-19 impact changed many short-term business priorities, and our near-term focus has shifted to supporting the country's healthcare system to effectively manage the situation and maintain the health of the Georgian population. At the same time, we have prepared for the economic downturn, for which the group is well positioned."
Furthermore, Georgia Capital issued its own first quarter trading update which showed its net asset value per share on March 20 to be GEL20.18, down 36% from GEL46.84 at the end of 2019.
This was attributed to the "depressed valuations" of Bank of Georgia Group PLC and, indeed, Georgia Healthcare.
Georgia Capital Chair Irakli Gilauri said: "Georgia has, so far, managed to effectively deal with the Covid-19 pandemic. The government of Georgia's (GoG) steps resulted in the lowest number of confirmed cases and deaths per capita in the region. At the same time, GoG has secured USD3 billion in funding from international financial organisations for Georgia's public and private sectors, which is expected to be more than sufficient to fund the twin deficits.
Gilauri added: "International Monetary Fund estimates Georgia's GDP growth to contract by 4% in 2020 and rebound to 4% growth in 2021. Strong pre-Covid-19 macroeconomic fundamentals were reflected in the country's 1Q20 GDP growth, which was positive at 1.5% year-on-year. The business activity is expected to start gradual recovery from April's low as GoG has initiated smooth easing of the lockdown restrictions. Georgia plans to open doors for domestic tourism from 15 June and international tourism from 1 July."
The company's capital allocations have been put on hold and it plans "only limited investments until 2020 end.
By Anna Farley; annafarley@alliancenews.com
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