CUK.L Regulatory News (CUK)

8 Jul 2008 07:00



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS IN THAT JURISDICTION

8 July 2008

Care UK Plc

("Care UK" or the "Company")

Proposed Acquisition of 50 per cent of Partnership Health Group Limited ("PHG"), currently a joint venture between Care UK and Life Healthcare Group (Proprietary) Limited ("Life")

Proposed Placing of 4,666,666 New Ordinary Shares at a price of 345 pence per share

Proposed Amendment to the Articles of Association of Care UK

The Board of Care UK, the leading health and social care provider, today announces that the Company has entered into a conditional agreement to acquire the 50 per cent. interest in PHG not already owned by the company from its joint venture partner, Life, for an initial consideration of approximately £14.1 million, to be satisfied through a Vendor Placing on behalf of Life on Completion. 

In addition to the Vendor Placing, Care UK intends to raise a further £2.0 million through a Cash Placing to institutional and other investors. The net proceeds from the issue of the Cash Placing Shares will be used for general corporate purposes acknowledging that further consideration of £2 million may become payable. The Vendor Placing and the Cash Placing have been fully underwritten by Investec.

Highlights

The initial consideration for the acquisition is approximately £14.1 million, with a single further contingent consideration amount of £2.0 million payable should any of the four Wave 1 Independent Sector Treatment Centres ("ISTCs") currently operated by PHG continue to provide services following the end of their initial contract terms. The remaining shareholder loan of £2.9 million from Life to PHG, together with any accrued interest, will also be repaid by PHG at Completion with Care UK receiving an equivalent amount;

 

* This statement should not be interpreted to mean that the earnings per share of Care UK following the Acquisition will necessarily match or exceed the historical published earnings per share.

Placing Statistics

Issue Price	345 p
Number of Existing Ordinary Shares in issue prior to the Placing	56,882,432
Number of Vendor Placing Shares to be issued in connection with the Placing	4,100,831
Number of Cash Placing Shares to be issued in connection with the Placing	565,835
Enlarged Issued Share Capital	61,549,098

John Nash, Chairman of Care UK, commented: 

"We are pleased to be able to announce today the acquisition of the 50 per cent. interest in PHG that we do not already own. PHG has been very successful in operating its existing four ISTCs and its track record of clinical outcomes, patient satisfaction and financial performance is very strong. We believe that the combination of Care UK's existing Health Care business with PHG will provide the best opportunity to create a continuing health care business once the initial contract terms expire for the current ISTCs.

"Care UK's strategy continues to be to address both the Health and Social Care markets and this strategy is demonstrably well founded as the NHS and Local Authorities implement their plans to further utilise the independent sector to deliver services, to shift care from hospital environments to the community and to empower consumers to exercise choice and control. We are confident that our chosen markets continue to offer good opportunities for delivering exceptional long-term value to shareholders."

A conference call for analysts will be held today at 8.30 a.m. The dial in number is: +44 (0)20 7162 9961.

For further information please contact:

Care UK	01206 752 552
Michael Parish/ Paul Humphreys
Investec	0207 597 5970
Richard Jones/ Patrick Robb/ Martin Smith
Weber Shandwick Financial	0207 067 0700
Louise Robson/ Stephanie Badjonat

A circular will shortly be posted to Shareholders comprising a class 1 circular containing details of the Placing and notice of the General Meeting of the Company (the "Circular").

Once published, copies of the Circular will be available for inspection at the UK Listing Authority's Document Viewing Facility, which is situated at:

The Financial Services Authority

25 The North Colonnade

Canary Wharf

London E14 5HS

This summary should be read in conjunction with the full text of this announcement.

This announcement is not a prospectus but an advertisement and investors should not subscribe for any New Ordinary Shares referred to in this announcement except on the basis of the information contained in the Circular. Copies of the Circular will, following publication, be available from the Company's registered office at Connaught House, 850 The Crescent, Colchester Business Park, Colchester, Essex, CO4 9QB.

This announcement does not constitute an offer of, or the solicitation of any offer to buy, any New Ordinary Shares to any person in any jurisdiction. The distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdiction. 

None of the Ordinary Shares nor the New Ordinary Shares have been or will be registered under the United States Securities Act of 1933, as amended, or under the applicable securities laws of any state of the United States, any province or territory of Canada, Japan, the Republic of South Africa or Australia. Accordingly, unless a relevant exemption from such requirements is available, the New Ordinary Shares may, subject to certain exceptions, be offered, sold, taken up or delivered, directly or indirectly, within the United States, Canada, Japan, the Republic of South Africa or Australia or in any country, territory or possession where to do so may contravene local securities laws or regulations. Shareholders who believe that they, or persons on whose behalf they hold Ordinary Shares, are eligible for an exemption from such requirements should refer to the Circular to determine whether and how they may participate. 

Investec Investment Banking, a division of Investec Bank (UK) Limited, which is regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company as sponsor, broker and underwriter and for no one else in relation to the matters described in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Investec Investment Banking or for providing advice in relation to the subject matter or contents of this announcement.

Care UK Plc ("Care UK" or the "Company")

Proposed Acquisition of 50 per cent of Partnership Health Group Limited ("PHG"), currently a joint venture between Care UK and Life

Proposed Placing of 4,666,666 New Ordinary Shares at a price of 345 pence per share

Proposed Amendment to the Articles of Association of Care UK

1. Introduction 

The Board of Care UK today announces that it has entered into a conditional agreement to acquire the 50 per cent. interest in PHG not already owned by the Company from its Joint Venture partner, Life, for an initial consideration of approximately £14.1 million, to be satisfied through the issue of the Vendor Placing Shares at the Issue Price on behalf of Life on Completion. 

In addition, on Completion, PHG will repay to Life the remaining shareholder loan balance provided by Life to PHG of £2.9 million plus accrued interest. PHG will also pay an equivalent amount to Care UK at the same time by way of repayment of the shareholder loan provided by Care UK to PHG, together with accrued interest.

Further consideration of £2.0 million will become payable in cash should any of the four Wave 1 ISTCs currently operated by PHG continue to provide services following the end of their initial 5-year contracted periods. This additional consideration would become payable should Care UK agree to continue to provide services at any of these ISTCs, whether under contract or not. Interest may become payable on the initial consideration by Care UK should Completion be delayed. 

The Acquisition, because of its size relative to the Group, is classified as a class 1 transaction under the Listing Rules and is therefore conditional upon the approval of Shareholders at a General Meeting.

The Acquisition is also conditional on, inter alia, the written consent from the DoH and, because Life is a South African domiciled company, exchange control approval from the South African Reserve Bank. The Directors have been informed by Life that the South African Reserve Bank has given its approval for the Acquisition. The Directors expect that the written consent from the DoH will be received prior to the General Meeting, however, if this is not the case, the date of Admission and Completion may be delayed. The Acquisition and the Placing will not proceed if all such approvals have not been received by 22 August 2008. 

The Company also announces that it intends to raise approximately £16.1 million by means of a Placing. The initial consideration for the Acquisition will be satisfied through the placing of the 4,100,831 Vendor Placing Shares at the Issue Price with institutional and other investors on behalf of Life. In addition, the Company will issue 565,835 Cash Placing Shares at the Issue Price to raise approximately £2.0 million before expenses. The net proceeds from the issue of the Cash Placing Shares will be used for general corporate purposes acknowledging that further consideration of £2 million may become payable as mentioned above. The Placing has been fully underwritten by Investec.

The Issue Price represents a discount of approximately 3.3 per cent. to the closing middle market price of an Ordinary Share on 7 July (the latest practicable date prior to publication of this announcement). The Placing Shares will represent approximately 8.2 per cent. of the Existing Ordinary Shares and approximately 7.6 per cent. of the Enlarged Share Capital.

The Company also intends to use the General Meeting to seek approval for certain changes to its articles of association in the context of legislative changes which are in the process of being implemented by the Companies Act 2006. 

2. Information on Care UK 

Care UK is a leading provider of health and social care services in the UK. It operates in two core business areas: Social Care, comprising the Residential Care, Community Care and Specialist Care divisions; and Health Care. 

Social Care 

The Residential Care division provides a range of services, principally for older people, with growing emphasis on rehabilitation and complex needs. As at 31 March 2008 the division operated 3,293 beds in 56 care homes, which have either been constructed by the Group or, in a limited number of cases, transferred into the Group from Local Authorities. A key characteristic of this division is that around 70 per cent. of the beds are operated under long-term contracts from Local Authorities and the NHS. The Group is now also actively seeking opportunities for the development of new care homes targeted at the self-pay market. 

The Community Care division provides support for people in their own homes or other community-based settings through a range of domiciliary and personal care services. As at 31 March 2008 the division provided approximately 119,000 hours of homecare per week, mainly for older people as well as others with specialist needs. The majority of activity in this division is commissioned by Local Authorities. 

The Specialist Care division provides services linked by psychiatric, therapeutic or social and behavioural needs, which are mainly purchased by Local Authorities and PCTs, under a mix of contracted and spot purchase arrangements. As at 31 March 2008 the division operated 520 places in 65 care facilities and, in addition, provided 461 supported living or foster care placements. The service areas covered include mental health, learning disabilities and children's services. 

Health Care 

The Health Care division, which includes the Group's current 50 per cent. interest in PHG, was originally established to participate in the DoH's strategy to reform the provision of NHS services, firstly through the establishment of the joint venture with Life and, secondly, through the organic development of a primary care orientated business. The Company's acquisition of Mercury in April 2007 brought substantial additional scale to this division resulting in the delivery of a broader range of services to NHS patients. The acquisition of Mercury also gave Care UK a wholly owned secondary care capability, reducing its dependency on Life and restricting the scope for PHG to develop further as a joint venture. The Health Care division now comprises 9 ISTCs, 6 Primary Care centres (with 2 new services to be introduced shortly), 1 Urgent Care centre, 2 out of hours centres and 4 prison health contracts.

3. Information on PHG

PHG is a joint venture between Care UK and Life, a private hospital operator based in the Republic of South Africa. PHG was formed in 2003 in order to bid for the construction and operation of ISTCs, which were introduced by the DoH as part of a number of health reform initiatives effected by the UK Government. PHG currently operates four ISTCs for NHS patients under these contracts with a fifth contract recently having been signed. 

The four existing centres, all procured under the Wave 1 ISTC programme, provide a range of diagnostic, investigation and routine orthopaedic and general surgical procedures for otherwise well patients. These ISTCs are all operated under 5 year contracts that, inter alia, contain provisions for guaranteed revenue amounts and the re-purchase of the centres by the DoH should no agreement be reached for the continued operation of the centre following the expiry of the initial contract term. The four Wave 1 centres are set out in the table below, together with their respective initial contract expiry dates. PHG has also recently signed a contract for the provision of a fifth ISTC to be located at the Royal South Hants Hospital in Southampton. Services under this Phase 2 contract are expected to commence in autumn 2008. 

Centre	Location	Services	Expiry of initial contract term
Peninsula NHS Treatment Centre	Plymouth, Devon	Orthopaedic procedures	March 2010
Barlborough NHS Treatment Centre	Barlborough Links, near Chesterfield, Derbyshire	Orthopaedic procedures	April 2010
Mid-Kent NHS Treatment Centre	Maidstone, Kent	Chemotherapy and general surgical procedures	October 2011
North East London NHS Treatment Centre	Goodmayes, NE London	Orthopaedic and general surgical procedures	December 2011

Plymouth

The centre in Plymouth performs approximately 3,200 orthopaedic procedures a year. The building contains 28 inpatient beds, 8 day case beds, critical care beds with 2 operating theatres and recovery areas, an outpatient department, in-house pathology, a pharmacy, and its own diagnostic imaging department. Procedures at the centre include a mix of joint replacements including total hip replacement, total knee replacement and hip revision surgery. In addition, around 340 shoulder procedures (sub-acromial decompression and shoulder stabilisations) and 310 anterior cruciate ligament repairs are expected over the period of the contract. The remaining treatments are orthopaedic day cases including arthroscopies, hand, foot and soft tissue or muscle procedures. 

Barlborough

The Barlborough centre typically performs about 4,500 orthopaedic procedures a year. The centre contains 36 inpatient beds, 6 day case beds, critical care beds and a physiotherapy gymnasium, with 3 operating theatres and recovery areas, an outpatient department, in-house pathology, a pharmacy, and its own diagnostic imaging department. The wards have a mixture of four, two and single beds. Procedures at the Barlborough NHS Treatment Centre include a mix of joint replacements including total hip replacement, total knee replacement and hip revision surgery. These account for around half of the procedures carried out annually. The remaining treatments are orthopaedic day cases including arthroscopies, hand, foot and soft tissue or muscle procedures. 

Maidstone

The Maidstone centre provides dedicated facilities for patients requiring a range of surgical, gynaecological and orthopaedic day surgery, endoscopies and outpatient chemotherapy procedures. Equipped with two operating theatres, endoscopy facilities, 20 day beds, four post-operative recovery beds and facilities for chemotherapy patients, it is expected that the unit will treat more than 10,000 patients per annum requiring elective day case procedures and scopes and provide over 8,000 chemotherapy treatments per annum. 

North East London

The fourth centre, the North East London Centre, is located adjacent to the A&E Department of King George Hospital, Goodmayes in East London. This delivers a range of diagnostic and outpatient services, planned elective inpatient and day case surgery, and community rehabilitation. The case mix comprises general surgery, orthopaedics, ophthalmology, urology, oral, ear nose and throat and endoscopy. The centre is equipped with two high tech laminar flow orthopaedic theatres, two general theatres, one ophthalmic theatre and one scope theatre. There are 26 day beds, 22 inpatient beds and five consulting rooms with significant expansion of this outpatient facility pending. 

Southampton

In May 2008 PHG signed a seven-year contract with the DoH for the construction and operation of an ISTC to be located within the Royal South Hants Hospital in Southampton. This contract, which was procured by the DoH as part of the Phase 2 ISTC programme, provides for a range of orthopaedic, gynaecology, ophthalmology, oral, urology, ear nose and throat, diagnostic and general surgical procedures to be delivered to NHS patients. 

In common with all Phase 2 contracts the proportion of revenue that is guaranteed over the initial contract term is lower than the total that is actually expected to be generated over the contract period. The expected activity level reflects demand analysis carried out by the NHS and PHG and will be derived from a combination of activity to be transferred from existing centres and additional activity generated through PHG creating links with local GPs and patient groups. Approximately 70 per cent. of the expected total revenue over the initial contract period is guaranteed with the balance to be achieved through PHG creating links with local GPs and patient groups. The total capital investment required from PHG for this project is only approximately £4 million as the majority of the expenditure on buildings and equipment is being funded by the PCT and provided to PHG under a seven-year lease.  In the event that the Acquisition does not proceed, PHG and Life have agreed to confer the economic benefit of this project on Care UK and Care UK has agreed to assume the economic burden and hold Life harmless in respect thereof and the parties have agreed to co-operate for the purposes of seeking to transfer the project to Care UK.

4. Background to and reasons for the Acquisition 

The Board considers that full ownership of PHG would give Care UK significantly enhanced scale and a broader range of wholly owned competencies to enable it to compete successfully in the emerging market for the provision of services by the independent sector to NHS patients.  Following the Acquisition, annualised ongoing revenue for the Health Care division would be over £100 million based on the results for the Health Care division for the six months ended 31 March 2008.

In addition, the two Phase 2 contracts signed by Care UK and PHG will add a combined minimum guaranteed average annual revenue of approximately £45 million over their 7-year lives, once both are fully operational, with additional revenue possible depending on the performance of the contracts.

The Directors expect sole ownership of PHG to provide the best opportunity to create a continuing business for the existing four Wave I ISTCs once their initial contract terms expire. 

PHG's track record of clinical and operational performance is very strong. For example, recent patient satisfaction surveys have compared PHG Group's centres to the top 20 per cent. of NHS hospitals on a range of 20 measures; each centre has been rated very highly and in the most recent survey the Peninsula Centre in Plymouth has out-performed the comparator group of NHS hospitals on every measure. PHG has not had a single case of MRSA or C-Difficile with any inpatient throughout the period of operation of all of its centres. 

The first two of PHG's Wave 1 contracts reach the end of their initial terms in February and March 2010. It is the Directors' belief that the interests of the joint venture owners of PHG would be likely to diverge under the current structure as the Wave 1 contract expiry dates approach. Care UK is seeking to focus attention on the further development of PHG's services in preparation for continued services beyond the Wave 1 contracts. The services currently provided by PHG at these two ISTCs are focussed mainly on routine elective orthopaedic surgery and treatment. The Board believes that, whilst the performance to date has demonstrated good clinical outcomes and levels of patient demand as well as high patient satisfaction, all achieved through appropriate case mix streaming and independent sector focus, the units would benefit from greater scale and/or more extensive service provision. 

Sole ownership by Care UK will enable PHG to obtain greater benefit from Care UK's high level of business development competency. This should facilitate better focus on service development and customer engagement in planning for the continuation and development of the existing centres beyond their initial contract terms. In addition, sole ownership would enable more effective leverage of existing relationships as entry points to cross-sell Care UK's other service propositions. 

The Board believes that the Acquisition will be earnings enhancing for Care UK in the first full financial year following Completion. This statement should not, however, be interpreted to mean that the earnings per share of Care UK following the Acquisition will necessarily match or exceed the historical published earnings per share. 

5. Information on ISTCs 

In late 2002 the DoH initiated the first wave of procurement for ISTCs (Wave 1). These centres were envisaged as 'fast-track' centres where daycase and inpatient elective surgical procedures could be delivered efficiently and safely by independent sector providers. The short-term benefit from this programme was expected to be a significant reduction in waiting times for routine elective procedures, which were longer in the UK than most comparable developed countries. In the longer term the DoH was seeking to create a sustainable competitive market where the NHS would continue to be the commissioner of such services but where the service provision would be delivered by both NHS and independent sector providers on the basis of patients having the right to choose where and when to have their treatment. 

The first wave of ISTC procurement resulted in a total of 25 ISTCs being operated by 7 independent sector providers. Of these Care UK currently operates five in its own right and a further four through PHG, making Care UK the most successful independent sector provider of ISTCs. Waiting list times for the type of routine procedure undertaken through the ISTC programme have reduced considerably.

 

The DoH recognised that, in order to be able to create the planned long-term market structure, further investment in this initiative would be required and commenced the procurement of the Phase 2 ISTCs in mid 2005. Both Care UK and PHG were selected as preferred bidders for Phase 2 schemes in December 2006. Care UK recently signed the Manchester Clinical Assessment and Treatment Service ("CATS") Phase 2 contract and PHG has also recently signed the Hampshire/Isle of Wight Phase 2 contract, for the provision of a range of orthopaedic and general surgical procedures at a centre to be located at the Royal South Hants hospital in Southampton. 

6. Integration plan for the combination of Care UK and PHG 

The existing Care UK Health Care division comprises two business streams - Primary Care and Secondary Care. The Primary Care business operates an increasing number of GP services, walk-in health centres, prison health services and other specialised primary care services. In addition the recently signed Manchester CATS Phase 2 ISTC project will be managed within the Primary Care business. The Secondary Care division operates the five Wave 1 ISTCs that form the GC8 contract acquired with Mercury with centres in Portsmouth, Haywards Heath, High Wycombe, Gillingham and Havant. 

Care UK management are already very familiar with the operating structure and reporting procedures within PHG; Care UK currently owns 50 per cent. of the issued share capital of PHG and has representation on the PHG board. Care UK's intention, following completion of the Acquisition, is to integrate the PHG business into the Company's existing Health Care division. In the Directors opinion, the most important issue to be addressed over the next two to three years is the progressive expiry of the initial term of the Wave 1 contracts in order to create a sustainable business model for the long term. This is likely to require both a broadening of the current range of services provided by the various centres as well as increased scale as, following the expiry of the initial contract term, it is expected that procedure prices will be set at the level of NHS tariff. Currently the Wave 1 centres are paid around a 20 per cent. premium per procedure to the NHS tariff, to reflect the requirements of creating a wholly new market. The existing customer relationships that PHG has with the PCTs which are involved in commissioning its services will be important in establishing this position. The planned integration of PHG will be undertaken so as not to disrupt this important phase. As part of the terms of the Acquisition, Life will continue to provide IT support services to PHG, as currently provided, until 31 December 2011, which is the expiry date of the last of the Wave 1 centres, unless Care UK decides to terminate this arrangement sooner. 

Care UK does expect that certain purchasing synergies will be more readily available as a result of sole ownership of PHG through leveraging the combined scale of the enlarged Health Care business. 

7. Current trends in trading and prospects 

Care UK 

The Company released its unaudited consolidated interim results (prepared under IFRS) for the six months ended 31 March 2008 on 19 May 2008, reporting revenue (including its share of joint ventures) of £166.7 million (H1 07: £118.0 million), adjusted operating profit (before amortisation of intangible assets, impairment of goodwill and intangible assets and before joint venture net financing changes and taxation) of £15.9 million (H1 07: £11.6 million) and an adjusted profit before taxation of £8.7 million (H1 07: £7.1 million). 

On a statutory basis, the Company reported an operating loss of £3.8 million (H1 07: profit of £10.0 million) and a loss before taxation of £9.6 million (H1 07: profit of £6.8 million). 

On 19 May 2008 the Company announced the following statement as part of its unaudited consolidated interim results for the six months ended 31 March 2008: 

"Care UK's strategy continues to be demonstrably well founded as the NHS and Local Authorities implement their plans to further utilise the independent sector to deliver services, to shift care from hospital environments to the community and to empower consumers to exercise choice and control. 

The Board believes that Care UK's strategy to address both the Health and Social Care markets is a significant market differentiator given the increasingly evident transition towards greater integration of care pathways across the traditional boundaries between the NHS and Social Services. We are confident that our chosen markets continue to offer good opportunities for delivering exceptional long-term value to shareholders." 

On 30 June 2008 the Company released a statement confirming that trading was in line with expectations as outlined in its interim results statement issued on 19 May 2008. The statement also confirmed that the Board remained confident about the outlook for the current financial year.

PHG 

PHG's most recently reported results were the audited accounts for the year ended 30 September 2007. PHG reported consolidated revenue of £54.4 million (2006: £32.0 million), operating profit of £10.0 million (2006: £2.9 million), profit before tax of £6.4 million (2006: loss before tax of £9,000) and gross assets of £62.0 million (2006: £46.2 million) for the financial year. Trading in the current financial year is ahead of both the previous year and the Board's expectations for 2008 and both clinical outcomes and patient satisfaction levels continue to be strong. 

All four Wave 1 centres have fully contracted case mixes and guaranteed revenues. The procedure prices payable under the four contracts increase annually on 1 April in line with either RPI or RPIX and the price increases for 2008 have now been concluded at levels slightly higher than expected. 

All of PHG's Wave 1 centres were funded by a mix of parent company and senior debt funding. All of the senior debt was swapped into fixed rates on commencement of the underlying contract hence PHG carries no interest rate risk. 

In May 2008 PHG signed the 7-year Phase 2 ISTC contract for provision of a treatment centre to be located in the Royal South Hants hospital in Southampton. The expected capital investment required for this project is £4 million and services are due to commence in autumn 2008. The South Central SHA through the Southampton City PCT is funding the building refurbishment work and the equipment required within the unit. These will be leased to PHG for the duration of the contract, although under the terms of the contract PHG would be responsible for any overrun should the cost of the building refurbishment work exceed £12.3 million. The refurbishment work programme commenced in winter 2007 and is now well advanced; there is currently no indication that any material cost overrun will arise. Should the building programme be delayed or services commence later than provided for in the contract PHG could be liable for certain immediate revenue deductions. The Directors are not currently aware of any reason why this would occur. 

 

8. Details of the Placing 

The Company has entered into a placing agreement with Investec pursuant to which, as agent for the Company, by way of the Placing, conditionally placed with institutional and other investors 4,666,666 New Ordinary Shares at the Issue Price to raise approximately £16.1 million (approximately £15.0 million net of expenses). The Placing has been fully underwritten by Investec. 

The Issue Price represents a discount of approximately 3.3 per cent. to the closing middle market price of an Ordinary Share on 7 July 2008 (the latest practicable date prior to publication of this announcement). The New Ordinary Shares will represent approximately 8.2 per cent. of the Existing Ordinary Shares and approximately 7.6 per cent. of the Enlarged Share Capital. 

The Directors will, in aggregate, subscribe for 170,695 New Ordinary Shares pursuant to the Placing.

The New Ordinary Shares will be issued credited as fully paid and will, on issue, rank pari passu with the Existing Ordinary Shares including the right to receive all dividends or other distributions declared, made or paid thereon following Admission. 

The Placing Agreement contains warranties and indemnities given by the Company to Investec which are customary for a placing of this nature. 

Application will be made to the Financial Services Authority for the New Ordinary Shares to be admitted to the Official List. It is expected that Admission of the New Ordinary Shares will become effective and that dealings in the New Ordinary Shares will commence on 1 August 2008. 

The Placing will, inter alia, be conditional on the following conditions being satisfied by no later than 8 a.m. on 22 August 2008, as the Company and Investec may agree: 

(1) the passing (without amendment) of the Resolutions numbered 1, 2 and 3 contained in the Notice of General Meeting open (save that the Company is entitled in its discretion to waive Resolutions numbered 2 and 3);

(2) the receipt by the Company of an approval of the Acquisition from the DoH; 

(3) the receipt by Life of an approval of the Acquisition by the South African Reserve Bank; 

(4) the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms; and 

(5) Admission. 

Subject to the conditions being satisfied, the Placing Shares will be registered either: 

(1) in certificated form, with the relevant share certificate expected to be despatched by post, at the Shareholder's risk, by 8 August 2008; or 

(2) in CREST, with delivery (to the designated CREST account) of the New Ordinary Shares expected to take place on 1 August 2008. 

 

9. Proposed amendments to Articles of Association 

The Company is also taking this opportunity to propose changes to its articles of association in the light of legislative changes, primarily taking into account the changes introduced or to be implemented pursuant to the Companies Act 2006. 

10. General Meeting 

The purpose of the General Meeting is to approve the resolutions in connection with the Proposals, a summary of which is set out below: 

Resolution 1 is an ordinary resolution seeking shareholder approval to the Acquisition, being a Class 1 transaction, as required under the Listing Rules; Resolution 2 is an ordinary resolution renewing, following the Placing, the general authority of the directors pursuant to s.80 Companies Act 1985, to allot relevant securities in the capital of Care UK; Resolution 3 is a special resolution, pursuant to s.95 Companies Act 1985, renewing, following the Placing, the general authority conferred on the directors in this regard to empower the directors to allot equity securities as if s.89 of the Companies Act 1985 did not apply; and Resolution 4 is a special resolution to effect the amendment of the Company's articles of association by the adoption of new articles of association. A copy of the Articles of Association showing changes against the existing articles of association of the Company will be available at the Company's registered office. 

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Latest time and date for receipt of Forms of Proxy for the General Meeting	9 a.m. on 29 July 2008
General Meeting	9 a.m. on 31 July 2008
Expected date of Admission and commencement of dealings in the New Ordinary Shares and Expected date of Completion	1 August 2008
CREST accounts credited for the New Ordinary Shares	1 August 2008
Despatch of definitive share certificates for the New Ordinary Shares held in certificated form	8 August 2008

The dates and times above may be adjusted by Care UK, in which event details of the new dates and times will be notified to the UK Listing Authority and the London Stock Exchange and, where appropriate, to Shareholders.

DEFINITIONS

The following definitions apply throughout this announcement unless the context requires otherwise:

"Acquisition"	the proposed acquisition of 50 per cent. of the share capital of PHG, being the share capital of PHG not already owned by the Company
"Act" or "Companies Act"	the applicable provisions of the Companies Act 1985 and the Companies Act 2006 from time to time in force and as they are supplemented and amended
"Admission"	admission of the New Ordinary Shares to the Official List and to trading on the London Stock Exchange's market for listed securities becoming effective in accordance with, respectively, the Listing Rules and the Admission and Disclosure Standards of the London Stock Exchange

"Articles of Association"	The articles of association which it is proposed are adopted by the Company pursuant to Resolution 4 in the Notice of General Meeting
"Board" or "Directors"	the directors of Care UK
"Care UK" or "Company"	Care UK Plc
"Care UK Group" or "Group"	Care UK and its subsidiaries (other than PHG and its subsidiaries)
"Cash Placing"	The placing by Investec Investment Banking of the Cash Placing Shares on behalf of the Company under the terms of the Placing Agreement
"Cash Placing Shares"	565,835 Ordinary Shares to be placed pursuant to the Cash Placing on behalf of the Company to institutional and other investors at the Issue Price
"Completion"	the point in time of completion of the Acquisition in accordance with the terms of the Acquisition Agreement
"CREST"	The relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the Operator (as defined in the CREST Regulations)
"CREST Regulations"	The Uncertified Securities Regulations 2001
"DoH"	The Department of Health of the UK Government
"Enlarged Share Capital"	the Existing Ordinary Shares and the New Ordinary Shares
"Existing Ordinary Shares"	the number of Ordinary Shares of the Company in issue at the date of this announcement
"GC8"	the Wave 1 ISTC contract for the operation of five treatment centres in the South East of England acquired by Care UK through the acquisition of Mercury
"General Meeting"	the general meeting of the Company convened for 9 a.m. on 31 July 2008, or any reconvened meeting following any adjournment thereof
"Investec"	Investec Bank (UK) Limited
"Investec Investment Banking"	Investec Investment Banking, a division of Investec Bank (UK) Limited
"Issue Price"	345 pence per New Ordinary Share
"ISTC"	independent sector treatment centre
"Life"	Life Healthcare Group (Proprietary) Limited, a company incorporated and registered in the Republic of South Africa with registered number 2003/024367/07

"Listing Rules"	The Listing Rules of the UK Listing Authority
"Mercury"	Mercury Health Holdings Limited
"NHS"	the National Health Service
"New Ordinary Shares"	the Vendor Placing Shares and the Cash Placing Shares
"Official List	the Official List of the UK Listing Authority
"Ordinary Shares"	ordinary shares of 10 pence each in the capital of the Company
"PCT"	Primary Care Trust
"Phase 2"	the second group of ISTC contracts, procured by the DoH in a programme commencing in 2005
"PHG"	Partnership Health Group Limited, a company incorporated and registered in England and Wales under the Companies Act 1985 with registered number 04648945
"PHG Group"	PHG and its subsidiaries
"Placing"	the Cash Placing and the Vendor Placing
"Placing Agreement"	the agreement dated 8 July 2008 made between Investec and the Company
"Proposals"	the Acquisition, the Placing, the proposed amendments to the Company's articles of association and the passing of the proposed Resolutions
"Resolutions"	the resolutions relating to the Proposals to be considered by Shareholders at the General Meeting
"RPI"	Retail Price Index as measured by the Office for National Statistics
"RPI X"	All Items Retail Prices Index excluding Mortgage Interest as measured by the Office for National Statistics
"SHA"	Strategic Health Authority
"Shareholders"	holders of Ordinary Shares from time to time
"South African Reserve Bank"	the Reserve Bank of the Republic of South Africa
"UK Listing Authority"	the Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000
"United Kingdom"	the United Kingdom of Great Britain and Northern Ireland

"Vendor Placing"	the placing by Investec Investment Banking of the Vendor Placing Shares on behalf of Life under the terms of the Placing Agreement
"Vendor Placing Shares"	4,100,831 Ordinary Shares to be placed pursuant to the Placing on behalf of Life to institutional and other investors at the Issue Price
"Wave 1"	the first group of ISTC contracts, procured by the DoH in a programme commencing in 2003

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