Subject of the Disclosure
Investment of KKR into Metro Pacific Hospitals Holdings, Inc. ("MPHHI"), the hospital and healthcare portfolio arm of Metro Pacific Investments Corporations ("MPIC")
Background/Description of the Disclosure
On October 14, 2019, MPIC, together with its hospitals and health care holding company, MPHHI, entered into a series of transactions for the investment and entry of global investment firm KKR & Co. ("KKR"), alongside Arran Investments Pte. Ltd, a subsidiary of GIC, Singapore’s wealth fund, in and to, MPHHI, to wit:
• MPHHI and Buhay (SG) Investments Pte. Ltd (“Buhay SG”), a subsidiary of KKR, entered into a Share Subscription Agreement ("SS Agreement") pursuant to which the parties agreed that on the Completion Date (as defined in the SS Agreement) and subject to the terms and upon the fulfillment of the conditions specified therein, MPHHI shall issue to Buhay SG, and Buhay SG shall subscribe to, 41,366,178 common shares to be issued out of the existing authorized and unissued capital stock of MPHHI ("Subject Shares"), at the aggregate price of PhP5.2 billion. The Subject Shares shall, immediately after their issuance, represent approximately 2.74% of the resulting outstanding capital stock of MPHHI, entitled to vote, and approximately 6.25% of the aggregate par value of MPHHI.
• MetroPac Apollo Holdings, Inc. ("Apollo"), a Philippine registered company owned by MPIC and which owns and holds preferred shares of the outstanding capital stock of MPHHI, entitled to vote, entered into an agreement with Buhay SG for the issuance by Apollo of new common shares to the Buhay SG ("Apollo Shares"), subject to the terms and upon the fulfillment of the conditions specified therein. Upon their issuance, the Apollo Shares are expected to represent less than 35% of the resulting outstanding capital stock shares of Apollo.
• Related to this and as part of MPIC’s wider financing arrangements, MPIC and Buhay SG entered into an Exchangeable Bond Subscription Agreement ("EBSA") under the provisions of which MPIC agreed to create and issue to Buhay SG, and Buhay SG agreed to subscribe to, a mandatorily exchangeable bond, at the principal issue value of PhP30,097,345,402 (the "Exchangeable Bond"). The Exchangeable Bond relates to 239,932,962 common shares of MPHHI owned and held by MPIC ("Underlying Shares"), which Underlying Shares represent approximately 15.88% of the issued and outstanding capital stock of MPHHI, entitled to vote, on a fully-diluted basis. The agreement of MPIC to create and issue the Exchangeable Bond is subject to the terms and upon the fulfillment of the conditions specified in said EBSA, including, (i) confirmation by the Philippine Competition Commission that it will take no further action with respect to the transaction; (ii) and the securing of approvals and third party consents as may be applicable to MPIC and the KKR subsidiary.
[To be continued at the Other Relevant Information portion of the disclosure.]
Other Relevant Information
By virtue of such Exchangeable Bond, Buhay SG shall be entitled, among others, to exchange the Exchangeable Bond for all of the Underlying Shares on the earlier of (i) thirty (30) days after the date the common shares of MPHHI, including the Underlying Shares, are first listed on the Philippine Stock Exchange following its initial public offering of shares and (ii) the date that is 10 years from the issue date of the Exchangeable Bond ("Mandatory Exchange Date"). Upon the occurrence and continuance of certain events (such as, a payment default, any representation or warranty of MPIC being incorrect or misleading in any material respect or any other failure to comply with obligations under the EBSA, and MPIC's inability to pay debts) and the lapse of any applicable grace period ("Optional Exchange Date" and together with the Mandatory Exchange Date, the "Exchange Date"), Buhay SG shall likewise be entitled to exchange the Exchangeable Bond for all of the Underlying Shares. However, unless and until the Exchange Date occurs, the Exchangeable Bond shall not entitle Buhay SG (or the holder thereof) to any voting rights, dividend rights or other rights as a stockholder of MPHHI or to any other rights in respect of the Underlying Shares (except the rights provided in the EBSA, the Exchangeable Bond Instrument and the Conditions attached thereto).
• Separately, GIC, has agreed to restructure its current investment in MPHHI and re-invest alongside the said KKR subsidiary.
• On a fully-diluted basis, MPIC will hold 132,592,496 common shares of MPHHI representing 20% of the resulting outstanding common capital stock of MPHHI.
The abovedescribed transactions are expected to be completed before the close of 2019.
The abovedescribed transactions, in particular, the direct investment into MPHHI through the issuance of the Subject Shares, allows MPHHI to access new and/or additional world class technology and systems operations. Proceeds from this transaction are intended to support MPHHI's investments in additional hospitals and new healthcare businesses, and for general corporate purposes. The capital will also be used to invest in the Company’s existing subsidiaries, associates, and joint ventures to support their growth. The same transactions likewise benefit MPIC by allowing it to crystalize the values of MPHHI and employ proceeds from the exchangeable bond issuance to reduce its existing debt. At the same time, the entry of KKR (through Buhay SG) into MPHHI is anticipated to provide MPIC the opportunity to work with another strong partner which could substantially contribute and assist in the growth of its business in the healthcare sector.