Capio announces the proposed sale of Capio France to Vivalto Santé

Capio and Vivalto Santé (“Vivalto”) today announce that they have entered into exclusivity regarding the proposed sale of Capio France to Vivalto pending the finalization of the documentation related thereto as is customary in the French market. The consideration for the proposed transaction would be an upfront enterprise value of MEUR 425 plus an earn-out contingent on 2018 financial performance, up to a total enterprise value of MEUR 455. The proposed purchase by Vivalto is binding on Vivalto and fully financed. The proposed transaction would accelerate the positioning towards the less capital intensive Nordic operations and build on Capio’s leadership positions to further drive growth and shareholder value. The completion of the transaction would be subject to certain conditions, as further described below, including the approval of Capio’s shareholders at an EGM, as required under Swedish takeover regulation, to be convened in due course.

“Under the proposed transaction, we would secure an attractive price for our French operations, allow­ing Capio to accelerate its focus on the less capital intensive Nordic operations and build on its current leadership positions to drive further growth in a highly fragmented market, aided by specializa­tion and digitalization. The proposed combination of Capio France and Vivalto, also forms a strong healthcare provider positioned as the third largest private operator in France. Capio France, with its leading position in Modern Medicine and Rapid Recovery, will contribute to spread and accelerate its medical know-how for the benefit of the new company,” said Thomas Berglund, President and CEO of Capio.

“Capio France and Vivalto share a common understanding of the rapid changes facing the French private hospitals industry and the absolute need to focus on modern medicine, digitalization and innovation. Both groups have a similar philosophy of excellence and of Star hospitals, placing the quality of care and the patient pathway, before and after hospitalization, in center of their strategy. The proposed transaction should strengthen both Capio France and Vivalto to the benefit of all stakeholders and also pave the way for future collaboration between Capio Group and Vivalto within research, digitalization and new services,” said Daniel Caille Chairman and CEO of Vivalto.

Transaction details
The consideration for the proposed transaction would be an upfront enterprise value of MEUR 425 plus the earn-out contingent on 2018 financial performance in line with management expectations outlined in the January – June 2018 interim report, up to a total enterprise value of MEUR 455. This would imply an EBITDA multiple range of 9.0-9.6x and an EBITA multiple range of 19.0-20.3x based on Capio France’s LTM financials as of June 30, 2018. The proposed purchase by Vivalto is binding on Vivalto and fully financed.

Net proceeds are expected to be between MEUR 400 to 430 after deducting external net debt transferred and other items including customary working capital adjustments estimated at in total MEUR 25. In addition, the deconsolidation of Capio France from Capio Group would also remove the retirement liabilities related to the French business, estimated at MEUR 33, from Capio Group’s balance sheet (1). It is anticipated that proceeds from a sale would be used partly to pay down Capio Group debt and partly as a return of cash to shareholders. Capio will provide an update through which mechanisms this will be effected in due course.

Capio France employees’ representatives will be consulted as per applicable French law. Vivalto has completed all material commercial/financial due diligence and the enterprise value and related adjustments are agreed upon. Finalization of the transaction would be subject to:

  •  Completion of a confirmatory due diligence (including legal, tax and HR) of Capio France by Vivalto, the outcome of which may give Vivalto the right to terminate the proposed purchase, only if Vivalto were to identify risks (covered by the representations and warranties in the Sale and Purchase Agreement), for an aggregate amount of MEUR 25 or more
  •  The approval of relevant regulatory authorities, and
  •  The approval of the Capio shareholders at an EGM as required under Swedish takeover regulation as a consequence of Capio being subject to a public cash offer, to be convened in due course.

Provided that the conditions are satisfied, the transaction would be expected to close by end of December 2018. Capio has undertaken to cover Vivalto’s costs in relation to the proposed transaction by paying Vivalto’s actual costs and expenses up to MEUR 5.0 if the Capio board (i) terminates the proposed sale prior to having convened an EGM for approval of the proposed sale; (ii) does not convene or cancels the EGM, (iii) withdraws its proposal or its unanimous support for approval of the proposed sale by the EGM; including recommending the Capio shareholders to accept a public takeover offer for the shares in Capio. This cost-coverage arrangement has been approved by the Swedish Securities Council in AMN 2018:31. If Vivalto would not receive the approval of relevant regulatory authorities, Vivalto is obliged to cover Capio’s actual costs and expenses up to MEUR 5.0. Further information will be provided to the Capio shareholders in good time prior to the EGM, including the Board’s view of the Nordic market potential going forward. The EGM is expected to be held no later than two weeks before the expiry of the acceptance period under the public cash offer. 

Focusing on the Nordics 
Proceeds from the transaction will strengthen Capio’s capital structure and significantly enhance management’s ability to deliver Capio’s strategic focus and drive shareholder value across its less capital intensive Nordic operations.

Capio has today an established base in Modern Medicine and the Nordic market provides clear opportunities for continued strong organic growth. Capio’s specialized businesses and nationwide presence in Sweden, Norway and Denmark allow the company to rapidly expand tailor-made patient offerings and coherent care chains across the Nordic countries. Capio is at the forefront in driving digitalization in healthcare with its combined digital and physical platform (900,000 listed patients and more than 100 primary care centers), launched in Sweden and Norway to follow. The digital market in Sweden is currently growing at a rate of +100% p.a. and Capio is well positioned to capture growth in this rapidly growing market. In addition there are substantial growth opportunities through further consolidation of a fragmented market with a strengthened balance sheet.

As announced in the interim report January-June 2018, during the second half of 2018 Capio is preparing for a closer coordination of the businesses in Sweden, Norway and Denmark to accelerate growth and streamline offerings both from a medical and operational efficiency perspective. The step-wise implementation of this Nordic cooperation, based on specialization, will start in Q1 2019.

About Capio France
Capio has a strong national presence in seven healthcare regions, including the rapidly growing areas around Paris, Lyon and Toulouse. The segment’s 22 hospitals and specialist clinics provide a wide range of treatments, primarily within medicine, surgery and obstetrics. For the rolling twelve month period ending June 30, 2018, Capio France’s about 5,400 employees (average FTE) provided healthcare services across 645,000 outpatient visits and 130,000 inpatient visits respectively, generating net sales of MSEK 5,602 representing 35% of total group. The EBITDA of the same period was MSEK 479, representing 43% of total group and the EBITA was MSEK 227, representing 36% of total group. The capital employed of Capio France was MSEK 4,758 as at June 30, 2018.

Other
Capio continues to assess alternatives for its German operations and intend to intensify the process for the divestment of this operation from the beginning of September. Capio will return with more information once available.

PJT Partners is acting as exclusive financial adviser, Mannheimer Swartling and Allen & Overy are acting as legal advisers and Fogel & Partners as communication adviser to Capio on this transaction.


The Board of Directors of Capio AB (publ)


Media and investor call invitation

Media representatives, investors and analysts are invited to participate in telephone conferences as below. CEO Thomas Berglund and CFO Olof Bengtsson will comment on the proposed transaction and answer questions. Prior to the start of the telephone conference, presentation slides will be available at www.capio.com. 

Media conference call 
Tuesday August 21, 2018 at 09.15 (CET)

To participate in the telephone conference, please register and dial in five minutes prior to the start of the conference call.

Sweden: +46 8 566 426 94
France: +33 170 75 07 12 
UK: +44 20 3008 9802
US: +1 855 831 5945

Investor and analyst conference call
Tuesday August 21, 2018 at 10.30 (CET)

To participate in the telephone conference, please register and dial in five minutes prior to the start of the conference call.

Sweden: +46 8 566 426 64
France: +33 170 75 07 25
UK: +44 20 3008 9813
US: +1 855 753 2237

Contact:

Thomas Berglund, President and CEO
Telephone: +46 733 88 86 00, E-mail: thomas.berglund@capio.com

Olof Bengtsson, CFO
Telephone: +46 761 18 74 69, E-mail: olof.bengtsson@capio.com

Henrik Brehmer, SVP Group Communication & Public Affairs
Telephone: +46 761 11 34 14, E-mail: henrik.brehmer@capio.com

This is information that Capio AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 08.45 a.m. (CET) on August 21, 2018. 


(1) Estimated adjustments assuming illustrative closing at the end of 2018