Debt-servicing EOH sells health tech unit for R250m
EOH Abantu, a subsidiary of JSE-listed technology services company EOH, has sold its health technology business, Dental Information Systems Holdings (Denis), to investment firm AfroCentric in a R250 million deal.
Denis, together with its subsidiaries, was acquired by EOH in 2012 to provide the IT services company with healthcare technology capability and dental claims risk management, as well as dental insurance intellectual property.
In a statement, EOH says the sale of the Denis Group is in line with its stated strategic intent of selling non-core assets as it seeks to right-size the organisation.
AfroCentric is a black-owned, diversified investment holding company with a presence in the healthcare industry through a number of healthcare assets, including its ownership of Medscheme, a medical scheme administrator and managed care organisation.
According to EOH, the Denis Group business is aligned with AfroCentric’s strategic growth objectives, and the transaction is considered a compelling opportunity for Denis employees.
It notes the cash consideration received by EOH Abantu will primarily be utilised to reduce debt, which is consistent with EOH’s objective of creating a fit-for-purpose capital structure.
The deal awaits approvals from competition authorities on or before 30 April 2020.
According to EOH, the value of the consolidated net assets of the Denis Group at 31 July 2019 was R145.4 million.
It notes the profit after tax attributable to the net assets of the Denis Group for the 12 months ended 31 July 2019 was R34.8 million.
Debt-ridden EOH has had its fair share of challenges this year.
At the half-year, the company set a target to raise R1 billion from the sale of non-core assets for the next 12 months in order to pay off its debts.
The company said it had made good progress towards this target, having already realised approximately R523 million in sales in the 2019 financial year; the most significant of these being the sale of 70% of CCS to a strategic partner, RIB, for a consideration of R444 million.
The firm is also looking to build a more appropriate working capital structure. It explains that historically, there has been a lack of focus on working capital management, with large tranches of cash tied up in debtors.
In August, the company also sold off its stake in Twenty Third Century Systems and its subsidiaries for R122 million.
EOH’s problems surfaced after software giant Microsoft in February terminated its contract with the IT services company after an anonymous whistle-blower filed a complaint with the United States Securities and Exchange Commission about alleged malfeasance to do with a R120 million contract with the SA Department of Defence.
It then appointed ENSafrica, which conducted a forensic investigation that discovered R1.2 billion worth of shady deals at the company.
CEO Stephen Van Coller has been trying to clean up the mess since his appointment. In July, he indicated EOH will “ring-fence” problematic contracts into a single entity.
In October, EOH blacklisted and suspended payments to 50 enterprise development partners that it says were involved in shady dealings.