Virtus Health : Enters Into Binding Implementation Deed With CapVest

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ASX ANNOUNCEMENT

14 March 2022

VIRTUS HEALTH LIMITED (ASX: VRT)

Virtus enters into binding implementation deed with CapVest at improved price following receipt of updated non-binding, conditional indication of interest from BGH

Key Points

• Virtus has signed a Transaction Implementation Deed with an entity controlled by CapVest Partners LLP ("CapVest"), under which CapVest undertakes to:

1. acquire 100% of Virtus by a scheme of arrangement ("Scheme") offering total value to Virtus Shareholders of $8.25 cash per share less the value of any dividends or distributions declared or paid after today (including the $0.12 per share dividend declared by Virtus on 22 February 2022) ("Permitted Distributions"), and

• 1. make a simultaneous off-market takeover offer ("Takeover Offer"), conditional on (among other things) the Scheme failing and a 50.1% minimum acceptance condition, offering total value of $8.10 per share less the Permitted Distributions.
• The Scheme consideration of $8.25 cash represents a premium of c. 58.3% to the undisturbed Virtus share price of $5.21 as at 13 December 2021 ("Undisturbed Virtus Share Price"), being the last close price before the first announcement that Virtus had received an unsolicited proposal from BGH Capital Pty Ltd ("BGH") to acquire Virtus by scheme of arrangement.
• The value of the Takeover Offer of $8.10 cash represents a premium of c. 55.5% to the Undisturbed Virtus Share Price.
• The transaction outlined in the Transaction Implementation Deed ("Binding CapVest Transaction") is fully funded and binding. It is subject to limited conditions, and is not subject to any conditions within the control or discretion of CapVest.
• The Virtus Board may determine and pay a fully franked special dividend, based on the H1 FY22 Results at 31 December 2021, less the $0.12 per share dividend declared by Virtus on 22 February 2022, providing for up to 44 cents per share in cash on or shortly before implementation of the Binding CapVest Transaction, which could release up to approximately 19 cents per share in franking credits attached. Eligible shareholders may receive the benefit from these franking credits, subject to their marginal tax rate. The amount payable by CapVest under the Scheme or Takeover Offer will be reduced respectively by the amount of any such special dividend.
• The Board unanimously recommends the Binding CapVest Transaction in the absence of a Superior Proposal and subject to an independent expert concluding that the Scheme is in the best interests of Virtus shareholders and that the Takeover Offer is fair and reasonable.

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• CapVest improved the value of its proposal following, and in response to, a revised unsolicited non-binding conditional indication of interest from BGH to acquire all of Virtus' shares by scheme of arrangement at $8.10 per share less the Permitted Distributions, which Virtus received from BGH after the market closed on 10 March 2022 ("Latest BGH Indicative Proposal").
• Consistent with its fiduciary and statutory obligations, late on 10 March 2022, the Virtus Board resolved to engage with BGH to determine whether the latest BGH indicative proposal could become a binding proposal capable of acceptance by Virtus. However, following the subsequent receipt of CapVest's improved proposal and taking into account all of the relevant information and considerations in the best interests of Virtus and its shareholders, the Virtus Board unanimously determined that it would sign the Transaction Implementation Deed and would not engage further with, or provide due diligence access to, BGH in respect of the Latest BGH Indicative Proposal.
• The Transaction Implementation Deed contains a customary fiduciary out provision, which allows the Board to fully consider any further improved competing proposals from BGH or any other party that are or may reasonably be expected to lead to a Superior Proposal.

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Virtus Health Limited ("Virtus", ASX: VRT) announces that it has entered into a Transaction Implementation Deed ("TID") with an entity controlled by CapVest Partners LLP ("CapVest"), under which CapVest undertakes to acquire 100% of Virtus by way of scheme of arrangement ("Scheme") offering total value of $8.25 cash per share less the value of any dividends or distributions declared or paid after today (including the $0.12 per share dividend declared by Virtus on 22 February 2022) ("Permitted Distributions"), and a simultaneous off-market takeover offer ("Takeover Offer") offering total value of $8.10 less the Permitted Distributions (the Takeover Offer and the Scheme, together, being the "Binding CapVest Transaction").

The Virtus Board is permitted to declare and pay a fully franked special dividend of up to 44 cents per share on or before the implementation date of the Scheme or the Takeover Offer consideration being paid, if either transaction proceeds ("Special Dividend"). The Special Dividend could have up to approximately 19 cents per share in franking credits attached. There may be an opportunity for eligible shareholders, subject to their marginal tax rate, to receive the benefit from franking credits attached to any such Special Dividend. The amount payable under the Binding CapVest Transaction will be reduced by the amount per share of any such Special Dividend (but not the value of any franking credits). The payment and the amount of a Special Dividend remain at the discretion of the Virtus Board and will be subject to tax advice1.

The improved consideration reflected in the Binding CapVest Transaction followed, and was in response to, a further revised unsolicited non-binding conditional indication of interest from BGH Capital Pty Limited ("BGH") to acquire all of Virtus' shares by scheme of arrangement at

1 The Virtus Board reserves the right to declare and pay a Special Dividend that is less than 44 cents per share. Virtus intends to apply to the ATO for a class ruling on the treatment of the cash consideration and the Special Dividend in the hands of Australian resident shareholders.

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$8.10 per share less the Permitted Distributions ("Latest BGH Indicative Proposal"). Virtus received the Latest BGH Indicative Proposal after the market closed on 10 March 2022.

The Binding CapVest Transaction

Consistent with its fiduciary and statutory obligations, the Virtus Board has resolved that it is in the best interests of Virtus shareholders for Virtus to enter into the TID with CapVest. In so doing, the Virtus Board has secured the fully funded Binding CapVest Transaction for Virtus shareholders.

In reaching this decision, the Virtus Board had regard to the following factors:

• the certain value of the Binding CapVest Transaction at a significant premium to the Undisturbed Virtus Share Price;
• the certainty provided by the Binding CapVest Transaction, which values Virtus at 15 cents more2 than the indicative value conditionally proposed by BGH under the Latest BGH Indicative Proposal;
• the fact that the Binding CapVest Transaction is fully funded and binding, and subject to only limited conditions, none of which are within the control or discretion of CapVest (the Latest BGH Indicative Proposal is non-binding, conditional and indicative in nature and subject to conditions including satisfactory completion of due diligence by BGH, finalisation of debt commitments for a binding proposal, final approval from BGH's Investment Committee and entry into an agreed scheme implementation agreement with Virtus);
• the support of Virtus' fertility specialists for the Binding CapVest Transaction, and the value of those fertility specialists to Virtus;
• the value of a binding and certain fully funded transaction in light of increased uncertainty and volatility in the global economy and global equity and debt markets, in part related to the outbreak of the Russia-Ukraine war; and
• the fact that the TID has a customary fiduciary out provision, which allows the Board to fully consider any competing proposals, including from BGH, that are or may reasonably be expected to lead to a Superior Proposal.

Virtus Chair, Sonia Petering, said "The Virtus Board is unanimous in our view that the Binding CapVest Transaction is in the best interests of Virtus shareholders. In making this assessment, the Board has carefully considered a range of matters including its view of the intrinsic value of Virtus, the superior value proposed by CapVest, the certainty for shareholders of the Binding CapVest Proposal including in light of a more volatile global economy and capital markets, the support for the transaction indicated by our doctors, the general positive feedback from shareholders in recent weeks and the terms of the Transaction Implementation Deed which allow a contest for control to continue. The Board has been impressed with CapVest's future

2 If the Scheme is approved. If the Scheme is not approved, then Virtus shareholders will have an opportunity to receive the same value under the Takeover Offer as the indicative value conditionally proposed by BGH under the Latest BGH Indicative Proposal.

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plans for Virtus, its focus on quality and excellence in services to our patients and its intentions to support Virtus' doctors and employees to grow Virtus in Australia and internationally."

Virtus' Managing Director & CEO, Kate Munnings, said "The strong contest for control of Virtus and the certain and superior value placed on Virtus by CapVest is a testament to Virtus' market leading position and the benefits of the Precision Fertility™ strategy which will harness technology and data to improve pregnancy outcomes as well as improve clinician and patients' experience. It is also a strong endorsement of all Virtus staff and fertility specialists who continue to work extremely hard to help more people become parents. Support from CapVest will provide a strong foundation for Virtus and its fertility specialists to further develop their practices and accelerate the national and international growth of Virtus."

Virtus Executive Director and immediate past Medical Director of Virtus' Melbourne IVF, Dr Lyndon Hale, said "CapVest has received overwhelming support from our fertility specialists, who recognise the compelling prospects for Virtus presented by the Binding CapVest Proposal. CapVest is well positioned to support our fertility specialists as they continue to grow their market leading practices and deliver the best possible outcomes for our patients."

CapVest Senior Partner, Kate Briant, said: "Throughout the process we've been thoroughly impressed, not only by the strength of the business but also by the passion and dedication of Virtus's leadership, including its outstanding team of expert and caring clinicians. We're delighted to have reached an agreement with the Board of Virtus Health and look forward to working closely with the team to support the continued growth of this industry-leading fertility business. CapVest has a 20-year track record of partnering with industry leading companies and management teams in the healthcare sector to enhance services provided to health care professionals and their patients. With our access to capital, technical expertise and knowledge of the global fertility market, combined with the strength of the Virtus Health business and its team of experienced practitioners, we have exciting plans to continue to grow its position in Australia and support its continued international expansion. In realising this ambition, we will leverage our considerable investing experience across the world and access to significant new investment."

Background on the bidding contest to date

The TID has been entered into by Virtus against a background of proposals which have been tabled by BGH and CapVest over recent months. This background is briefly summarised below.

On 13 December 2021, BGH tabled a non-binding indication of interest to acquire Virtus by scheme of arrangement for $7.10 per share less the Permitted Distributions following BGH acquiring a relevant interest in 19.9% of Virtus ("First BGH Proposal").

On 20 January 2022, CapVest tabled a non-binding indicative offer to acquire Virtus by way of scheme of arrangement at $7.60 per share less the Permitted Distributions. CapVest also indicated that if the scheme was not successfully implemented, it would be willing to proceed with an alternative transaction structure, such as an off-market takeover bid, at $7.50 per share less the Permitted Distributions. In order to receive this proposal ("First CapVest Proposal"), Virtus signed a process deed with CapVest and granted it exclusive due diligence access.

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On 28 February 2022, BGH tabled a revised non-binding indicative proposal to acquire Virtus by scheme of arrangement for $7.65 per share less the Permitted Distributions, conditional on Virtus entering into an engagement deed with BGH and agreeing to certain conditions set out in Virtus' announcement of 28 February 2022 ("Second BGH Proposal").

On 1 March 2022, CapVest tabled a revised non-binding indicative proposal to acquire Virtus by way of scheme of arrangement at $7.80 per share less the Permitted Distributions. CapVest also indicated that if the scheme was not successfully implemented, it would be willing to consider an alternative transaction structure, such as an off-market takeover bid, at $7.70 per share less the Permitted Distributions. In announcing this revised CapVest proposal ("Second CapVest Proposal"), Virtus noted that CapVest expected to be in a position to enter into an implementation deed by 11 March 2022.

After market on 10 March 2022, BGH tabled a revised non-binding indicative proposal to acquire Virtus by scheme of arrangement for $8.10 per share less the Permitted Distributions, conditional on Virtus not signing an implementation deed with CapVest and other matters outlined below ("Latest BGH Indicative Proposal").

Following Virtus' receipt of the Latest BGH Indicative Proposal and as part of its final negotiations of the TID, which the parties signed on 13 March 2022, CapVest improved the Second CapVest Proposal to the terms now reflected in the fully funded Binding CapVest Transaction. As noted above, under the Binding CapVest Transaction, CapVest has undertaken to:

• acquire 100% of Virtus by scheme of arrangement offering total value to Virtus Shareholders of $8.25 cash per share less the Permitted Distributions, and
• make a simultaneous off-market takeover offer, conditional on (among other things) the Scheme failing and a 50.1% minimum acceptance condition, offering total value of $8.10 per share less the Permitted Distributions.

Board rationale for entering into TID with CapVest

The Board was not considering a sale of the company before receiving the unsolicited indicative, non-binding and conditional proposals from BGH and then CapVest. The Board has sought to maximise the value created for shareholders at all times in responding to the unsolicited proposals that it has received.

After receipt of the First CapVest Proposal, which included in it as a fundamental and necessary condition of CapVest's willingness to proceed an exclusive due diligence period, the Board granted CapVest access to a limited period of exclusive due diligence. This decision was made after careful consideration of the proposals it had received from CapVest and BGH at that time, including advice from its financial and legal advisers, and the Board's determination that the First CapVest Proposal was attractive for shareholders in the context of a change of control transaction and superior to the First BGH Proposal (with BGH also having already secured a relevant interest of 20% in Virtus).

Although BGH tabled the Second BGH Proposal with a higher price on 28 February 2022, CapVest responded with its own improved and revised Second CapVest Proposal before Virtus

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