Life Healthcare : Detailed terms announcement regarding the proposed disposal of Life Healthcare’s interest in Alliance Medical Group

LIFE HEALTHCARE GROUP HOLDINGS LIMITED	LIFE HEALTHCARE FUNDING LIMITED
(Incorporated in the Republic of South Africa)	(Incorporated in the Republic of South Africa
(Registration number 2003/002733/06)	with limited liability)
ISIN: ZAE000145892	(Registration number 2016/273566/06)
JSE AND A2X SHARE CODE: LHC	Bond company code: LHFI
("Life Healthcare" or "the Company" and,	("Life Healthcare Funding")
together with its affiliates, the "Group")

DETAILED TERMS ANNOUNCEMENT REGARDING THE PROPOSED DISPOSAL OF LIFE HEALTHCARE'S INTERESTS IN ALLIANCE MEDICAL GROUP TO iCON INFRASTRUCTURE AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

1. SALIENT FEATURES
   Please note that capitalised terms used in this section are as defined in the body of this announcement.
2. • Life Healthcare has entered into binding agreements with entities advised by iCON
     Infrastructure LLP for the sale of 100% of the Group's interests in Alliance Medical Group.
   • The sale and purchase agreement implies a post-IFRS 16 enterprise value of GBP 910 million (approximately ZAR 21,307 million1) and a cash purchase consideration payable by the Purchaser of GBP 593 million (approximately ZAR 13,880 million), subject to certain Equity Value Adjustments to be determined prior to the Completion Date.
   • The net proceeds from the Proposed Transaction (after settling remaining offshore debt, transaction-related expenses and retention of a portion of the funds for investment in growth initiatives) are currently estimated to be GBP 360 million (approximately ZAR 8,432 million). Subject to the required approvals, Life Healthcare intends to return the net proceeds to Shareholders, the majority of which by way of a special dividend.
   • The Proposed Transaction provides an opportunity for Shareholders to realise the material value in AMG in the immediate term and unlock a significant premium to the estimated value of AMG reflected in Life Healthcare's share price prior to the first transaction-related cautionary announcement.
   • Post completion, Life Healthcare will be positioned as a leading, diversified and integrated healthcare services provider, with strong southern African growth potential through its integrated care model and international growth potential through LMI's radiopharmaceutical portfolio.
   • The Proposed Transaction is subject to the fulfilment or waiver (to the extent permissible) of conditions precedent typical for a transaction of this nature.
3. INTRODUCTION

1. Life Healthcare shareholders ("Shareholders") and Life Healthcare Funding noteholders are referred to the cautionary announcements dated 15 February 2023, 23 March 2023, 26 April 2023, 6 June 2023, 29 June 2023, 10 August 2023 and 22 September 2023 released on the
   Stock Exchange News Service ("SENS") of the Johannesburg Stock Exchange ("JSE").
2. On 5 October 2023, the Group, acting through its wholly owned indirect subsidiary in the United Kingdom ("UK"), Alliance Medical Group Limited ("AMGL"), concluded binding transaction agreements with Andromeda Bidco Limited (the "Purchaser"), for the sale of 100% of the issued share capital of Alliance Medical AcquisitionCo Limited ("Sale Shares")

1 Exchange rate of GBP1 = ZAR23.42 as of close of business on 4 October 2023

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("AcquisitionCo") and its subsidiaries, which together comprise the Alliance Medical Group (herein referred to as "AMG"), to the Purchaser (the "Proposed Transaction"). The Proposed Transaction excludes the Group's interests in Life Molecular Imaging Limited, Life Molecular Imaging GmbH and Life Molecular Imaging Inc. (together, "LMI"), which do not fall within the perimeter of the Proposed Transaction.

2.3 The Purchaser is indirectly wholly owned by iCON Infrastructure Partners VI ("iCON Infrastructure VI"). iCON Infrastructure VI comprises two parallel limited partnerships, iCON Infrastructure Partners VI, L.P. and iCON Infrastructure Partners VI-B, L.P. iCON

Infrastructure LLP ("iCON Infrastructure") is the exclusive investment adviser to iCON Infrastructure VI.

3. RATIONALE FOR THE PROPOSED TRANSACTION

1. Life Healthcare advanced its geographic and healthcare diversification ambitions through the acquisition of AMG in 2016, providing the Group with a strong position in the complementary service lines of diagnostic imaging, molecular imaging, and radiopharmaceutical manufacturing across the UK and Europe. The Group further advanced its international strategy through its investment in 2018 in LMI, a fully integrated research and development radiopharmaceutical company dedicated to developing and globally commercialising innovative molecular imaging agents for use in PET-CT diagnostics.
2. Since 2016, Life Healthcare has focused on strategically developing and growing AMG's partnerships and services across the UK and Europe, resulting in AMG's revenue increasing by 63% in the past six years, from GBP 233 million in 2016 to GBP 379 million in the year to 30 September 2022. Over this time, AMG was a key driver of long-term value creation, based on its:

1. Competitive position as a vertically integrated provider of imaging services across the UK and Europe, operating 233 sites and delivering over 1.1 million scans per year across the UK and 10 other European countries;
2. Reputable footprint in its core markets as a trusted partner to the National Health Service (in the UK), Azienda Sanitaria Locale (in Italy) and Health Service Executive (in Ireland);
3. Significant, well invested asset base and strong competitive positions, which meant AMG has been forecasted to deliver consistent, hard currency returns well above its cost of capital; and
4. Ability to capture consistent demand growth driven by the UK and Europe's evolving healthcare needs and state systems which are unable to respond to capacity challenges. Driven by these demand factors, AMG is increasingly operating in an out-of-hospital community setting, as demonstrated by the expansion of its footprint through community diagnostic centres ("CDCs"), and it is well positioned for expansion into other European and Middle Eastern countries.

1. Based on the increasing demand for imaging services across the UK and Europe and AMG's attractive positioning in its core markets, the board of directors of Life Healthcare ("Board") and management of Life Healthcare continue to have strong conviction in AMG's prospects.
   AMG, with the full support of the Board, continues to execute its long-term strategy through, inter alia, development and expansion of its CDC footprint in the UK and Ireland, growth opportunities in Italy, increasing its cyclotron footprint in existing markets, continuing to increase its partnerships with its customers by entering into new contracts, driving increased volumes through existing infrastructure and improving efficiencies.
2. However, in late 2022 and early 2023, the Company received several unsolicited expressions of interest in AMG. Following extensive engagement, the interested parties submitted offers for AMG. The Board evaluated these offers and subsequently decided to proceed with iCON Infrastructure to enable it to submit a binding offer. After careful consideration, the Board believes the Proposed Transaction is in the best interests of Shareholders based on the following:

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1. Ability for Shareholders to realise significant value: The Proposed Transaction provides an opportunity for Shareholders to realise the material value in AMG in the immediate term and unlock a significant premium to the estimated value of AMG reflected in Life Healthcare's share price prior to the first transaction-relatedcautionary announcement;
2. Acceleration of value: As a result of the planned capital expenditure which forms a key pillar of AMG's business plan over the medium-term, a large portion of AMG's significant fundamental value sits in the outer years of the business plan. The Proposed Transaction therefore enables Shareholders to realise this longer-term value upfront, and de-risk the delivery of the AMG business plan from a Shareholder perspective;
3. Potential for AMG to continue to be undervalued in Life Healthcare's share price: Considering the market's valuation of AMG historically as reflected in the Life Healthcare share price, there is no guarantee that future value creation through AMG would be fully reflected in the Life Healthcare share price going forward, and it is therefore possible that
   AMG continues to be undervalued within the Group's share price;
4. Enhancement of Life Healthcare's financial profile and strengthening of the Group's financial position: The Proposed Transaction will result in improved return on capital metrics, as well as improved overall cash conversion, for the Group. The Proposed Transaction will also result in an overall reduction in gearing and an improved financial position. As a portion of the Purchase Consideration, as defined in paragraph 6.2 below, will be used to repay remaining international debt, the Proposed Transaction will result in Group gearing reducing to approximately one times net debt to normalised EBITDA2, providing headroom to invest in growth and supporting the Group's ability to return capital to Shareholders;
5. Increased management and capital allocation focus on attractive growth opportunities: AMG requires significant additional capital investment to meet its contract requirements, while the execution of the Proposed Transaction will allow management to focus its capital allocation priorities on accelerating its integrated care strategy in southern Africa and supporting the growth optionality in LMI to deliver value for Shareholders;
6. Repositioning of Life Healthcare: Following completion of the Proposed Transaction, Life Healthcare will be positioned as a leading, diversified and integrated healthcare services provider in southern Africa, with clear capital allocation priorities, a resilient and sustainable financial profile and a strong cash generation ability. Life Healthcare will have strong southern African growth potential through its integrated care model and international revenue growth potential through LMI's radiopharmaceutical portfolio; and
7. AMG is well positioned in the hands of the Purchaser: The funds advised by iCON Infrastructure are active investors in European healthcare infrastructure, with investments in both the diagnostic and molecular imaging sectors. AMG is an attractive player well placed to continue supporting Europe's evolving healthcare needs. iCON Infrastructure views the strategic positioning of AMG as a significant opportunity to continue the development of a vertically integrated, pan-Europeanimaging platform.

4. DESCRIPTION OF LIFE HEALTHCARE AND AMG

4.1 Life Healthcare is one of the largest private healthcare providers in southern Africa, primarily serving the private medically insured market and has over 40 years' experience in the private healthcare sector. Since commencing operations in the early 1980s with four hospitals, it has grown through acquisitions, capacity expansion within existing facilities, the addition of new lines of business and the development and construction of new hospitals. Life Healthcare currently operates 65 healthcare facilities (9,226 beds) in South Africa and one facility in Botswana.

2 Calculated as per Life Healthcare's debt agreements

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4.2 Life Healthcare's southern African healthcare business, which represented 70.8% of Life Healthcare's revenue during the financial year ended 30 September 2022, is organised into two divisions:

1. The hospitals and complementary services division provides services primarily to the private medically insured market, which represented approximately 8.95 million people in 20223. For the financial year ended 30 September 2022, the hospital and complementary services division generated 66.0% of Life Healthcare's revenue. The acute hospital business comprises general hospital facilities of various sizes. The complementary services business provides both inpatient or outpatient services in the areas of renal dialysis, acute rehabilitation, mental health, radiation and chemotherapy oncology, and diagnostic and molecular imaging.
2. The healthcare services division includes the provision of acute and long-term chronic mental health and frail care services to state patients through Life Nkanyisa, one of the largest Public-Private Partnerships in South Africa (3,163 beds). The division also includes services to provincial health and social development departments, and the provision of primary healthcare, occupational healthcare and employee wellness services to employer groups in commerce, industry, state-owned enterprises and mining, through Life Health Solutions. For the financial year ended 30 September 2022, the healthcare services division represented 4.8% of Life Healthcare's revenue.

4.3 The Group's international business, which represented 29.2% of the Group's revenue for the financial year ended 30 September 2022, includes AMG and LMI.

1. AMG, which represented 27.2% of the Group's revenue for the financial year ended 30
   September 2022, is one of the leading independent diagnostic and molecular imaging providers in the UK and western Europe, with a vertically integrated PET-CT network, enabling the manufacture and distribution of radioisotopes for its own PET-CT scanning facilities and third parties.
2. LMI, which represented 2.0% of the Group's revenue for the financial year ended 30
   September 2022, is a fully integrated research and development pharmaceutical company dedicated to developing and globally commercialising innovative molecular imaging agents for use in PET-CT diagnostics to detect specific diseases.

5. DESCRIPTION OF ICON INFRASTRUCTURE

iCON Infrastructure is the exclusive investment adviser to funds with cumulative commitments of approximately US$8.0 billion, including iCON Infrastructure VI. iCON Infrastructure is regulated by the UK Financial Conduct Authority. iCON Infrastructure VI, iCON Infrastructure's latest flagship fund, closed fundraising in June 2022 with cumulative commitments of approximately US$3.6 billion from over 50 investors. Investors in iCON Infrastructure's funds comprise globally recognised corporate and public pension funds, asset managers, insurance companies and sovereign wealth funds. The iCON Infrastructure group is focused on long term equity investments in infrastructure businesses located in Europe and North America, and the iCON Infrastructure funds have invested in a diversified portfolio of businesses spanning a range of infrastructure sectors including healthcare, transport, utilities, telecoms, energy and environment, and social infrastructure.

6. SALIENT TERMS OF THE PROPOSED TRANSACTION

6.1 General

6.1.1 The Proposed Transaction has been documented in a sale and purchase agreement ("SPA") between AMGL, the Purchaser and the Company governed by English law and will be implemented in accordance with applicable English and South African laws as well as laws of other applicable jurisdictions. The Proposed Transaction is subject to the

3 Council for Medical Schemes

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fulfilment or waiver (to the extent permissible) of the conditions precedent set out in the SPA, as summarised in paragraph 6.4 below ("Conditions Precedent").

1. On the completion date as set out in the SPA and as referred to in paragraph 6.5 below ("Completion Date") and provided that the Conditions Precedent have been satisfied or waived (to the extent permissible), AMGL will sell and the Purchaser will purchase the Sale Shares for the Purchase Consideration set out in paragraph 6.2 below as agreed and set out in the SPA. Accordingly, upon the Completion Date, the Purchaser shall become the owner of the Sale Shares and therefore the owner of the underlying assets comprising the business of AMG.
2. AcquisitionCo historically held various subsidiaries relating to both AMG and LMI. Following an internal restructure implemented in July 2023, LMI is now 100% held by Life Healthcare through its wholly owned indirect subsidiary AMGL. As such, AcquisitionCo, as the subject of the Proposed Transaction, holds only the subsidiaries relating to AMG. LMI does not fall within the perimeter of the Proposed Transaction.

6.2 Purchase Consideration

1. The purchase consideration payable by the Purchaser is currently estimated to be an amount of GBP 593 million (approximately ZAR 13,880 million), subject to the finalisation of certain equity value adjustments ("Equity Value Adjustments") to be determined prior to the Completion Date (the "Purchase Consideration"). The Purchase Consideration will be payable, in cash, to AMGL on the Completion Date free of any lien, right of set-off, counterclaim or other analogous right. No securities will form part of the consideration for the Proposed Transaction.
2. The Equity Value Adjustments will include the following:

1. addition of an amount of GBP 1.9 million in respect of vendor due diligence costs borne by Life Healthcare;
2. deduction of the following amounts (in each case as determined in accordance with the terms of the SPA):

1. an amount in respect of accrued interest on intra-group payables (owed by AcquisitionCo and/or its subsidiaries to other members of the Group) prior to the Completion Date;
2. an amount in respect of disclosed transaction costs paid or payable by AcquisitionCo and/or its subsidiaries;
3. an amount in respect of the shares subject to share incentive plans to be settled in cash that will vest on the Completion Date;
4. an amount in respect of the payments made pursuant to certain securities-based incentives prior to the Completion Date; and
5. an amount in respect of the tax arising from the vesting and/or settlement of any share incentive plans on the Completion Date;

6.2.2.3 deduction of "leakage" amounts customary for a transaction of this nature and the locked box mechanism set out in the SPA.

6.2.3 The attributable net debt (including debt-like items) of AMG as at 31 March 2023, together with the current estimated Purchase Consideration, implies a post-IFRS 16 enterprise value ("EV") for the Proposed Transaction of GBP 910 million (approximately ZAR 21,307 million).

6.3 Application of Purchase Consideration

6.3.1 Life Healthcare proposes to return the Purchase Consideration to Shareholders, following, inter alia:

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