South African health firm, Life Healthcare, announced on December 20, 2016 it plans to mobilize R10.7 billion ($757 million), about 30% of its issued shares, to buy a new hospital and reduce debt’s pressure on its activities.

On November 16, 2016, the firm said it would buy 95% of British Alliance Medical, molecular and diagnostic imaging service, through a short term loan from Barclays Plc and Rand Merchant Bank. Part of the proceeds the firm will now mobilize will be used to pay back this debt as it has increased its gearing (debt’s weight on private funds), resulting in a risk to negatively impact its profitability.

“The rights issue would put us on a sound financial footing to pursue expansion and continue paying dividends,” the group said in the statement

The transaction is still to be approved by Life Healthcare’s general assembly which will meet on January 25, 2017, to discuss the matter. Its share soared 1.42% on the Johannesburg Stock Exchange to R3,212. However, it is still lower than in September 2016, when it was its highest (about R4,000).

Idriss Linge