My relationship with Carl Grillenberger goes back to 1981. As a young reporter who had job-hopped his way to a living wage, I was attracted by an opportunity to buy into the property market. My entry was at the bottom end via a third floor apartment on hectically busy Clarendon Circle in Hillbrow – in an old block that Grillenberger’s company was selling off as sectional title. His advice was good: close your eyes and take the plunge. So when the noise fatigue proved too much, the apartment was sold a year later at a profit. I’m not alone in profiting from Grillenberger’s counsel. Those who followed him into and out of his 1986 listing Presmed did just fine – and a bunch of them were doubtless in the queue this morning as he returned to the JSE lists with Advanced Health. With the hedge of some Australian assets together with a day clinic concept that’s catching on in SA, Grillenberger looks to be onto another winner. Those who bought into Advanced Health ahead of listing would be been congratulating themselves this morning when banking a 25% stagging profit. But kicking themselves in the afternoon when the price rose to 145c – a healthy premium to the pre-listing offer of 100c. In this interview, the serial entrepreneur provides some insights into the way he intends adding value to his newest listed creation. – AH Â
ALEC HOGG: A big day for Advanced Health this morning. Carl Grillenberger, the Founder, Chief Executive, and Director of the company. It’s the second time around, for you to list a company, Carl.
CARL GRILLENBERGER: That’s correct, Alec.
ALEC HOGG: How did the listing this morning compare with Presmed all those years ago?
CARL GRILLENBERGER: I think the big difference you see is change in technology. When we listed Presmed in 1986, the technology was still a board, which you wrote on with chalk and today it’s all electronic.
ALEC HOGG: That’s a big difference. I listed a company in 1999, and I don’t think I’ll ever list a company again (ever is a long time), but did you feel the same way after Presmed?
CARL GRILLENBERGER: I felt the same way because I thought I had done what I wanted to done. I’ve achieved what I wanted to achieve, but then there was so much excitement coming up this thing – this potential – that we suddenly said ‘we can’t leave this alone. We are entrepreneurial in our thinking process’ and we decided to go, take advance, and say ‘listen; to really make Advanced work we need capital. That would be the best way to go ahead, and we need to create awareness about the type of business, as well’.
ALEC HOGG: So it’s twofold: raising capital on the one hand, and creating awareness. On the capital side, did you look at other options, rather than listing?
CARL GRILLENBERGER: No, we didn’t. We said at the time that we took the decision that it’s important to get the awareness in the general public, in the investment community, and in the medical community of South Africa. What is Advanced Health about? It’s about generating some form of change in the delivery of our surgical services in this country.
ALEC HOGG: I guess that’s the real question. How is Advanced Health different to Presmed?
CARL GRILLENBERGER: In the starting days when we started Presmed, we started the day-surgery facilities because that is a concept I saw in the United States. I was of course, very excited about it and we said ‘this is a concept, which we may start’. We were under pressure to look at private hospitals and Presmed became more of a private hospital company than a day surgery company. In addition, the health funds, which we have funding patients, actually neglected the day surgery, not seeing it as an important tool. Only last year, suddenly, the buyers of services – especially the health funds – said ‘we must do something to show a change and that change must actually help us become more cost-effective as an industry’.
ALEC HOGG: That’s fascinating, so you’re actually going back to your very roots in the sector.
CARL GRILLENBERGER: We are, but taking that into consideration and looking at the changes in technology, we’ve seen that this is an industry, which has enjoyed substantial growth in the United States and in other countries in the world, and it’s still growing in the world, mainly because of new technology and the surgical environment.
ALEC HOGG: Were you ahead of your time then, in the eighties?
CARL GRILLENBERGER: In terms of the South African market – yes. The South African market did not buy into day surgery, but at the time, the overseas market was quite strong already.
ALEC HOGG: It’s quite interesting that you’ve also been investing in Australia, so you have the two options.
CARL GRILLENBERGER: We went into the Australian market, seeing that there was a larger acceptance of day surgery and we entered the Australian market fairly early. Quite a few surgical units have been developed since we started there. When we started, the doctors who joined us in Australia were basically doing the surgery in the private hospital environment and seeing what we were doing, they started looking at. It started in bits and pieces, but eventually they became so confident that they said ‘we do all our surgical interventions that can be one in the day surgery environment, on that basis’ and that helped us to grow our Australian…
ALEC HOGG: Did you learn from Australia then to apply into South Africa or vice versa?
CARL GRILLENBERGER: We learned quite a bit, especially our Australian units, about function, and planned and focused quite a bit on eye surgery. We saw this as an ideal opportunity to take this out of the hospital environment into a day surgery.
ALEC HOGG: Eye surgery.
CARL GRILLENBERGER: Eye surgery.
ALEC HOGG: That’s interesting for people who wear glasses or are always watching this laser surgery and the way it’s changing. Is it gathering further momentum?
CARL GRILLENBERGER: The laser market is growing and enjoying further momentum. The only difference is that we haven’t done any laser work in Australia. We’ve done quite a bit of that in South Africa and looking forward, we’re actually trying to focus more on the laser side, too.
ALEC HOGG: Carl, people like your story. The offer was oversubscribed pretty heavily. What is it you’re telling them, that’s getting them so excited?
CARL GRILLENBERGER: I think they see that there is a change, taking place. I think the perception in the marketplace is that we’ve had good investments in the healthcare environment, but the Competition Commission is looking at ways in which change can be brought into the South African environment. Because of that change, we actually from Advanced Health and I think the market is buying into that change, which we are focusing on.
ALEC HOGG: Who have you managed to pull in as shareholders?
CARL GRILLENBERGER: We have – surprisingly – a very wide variety of shareholders. Our total shareholders in number are close to 1300 shareholders, where we had to comply with the minimum requirement of only 100 shareholders. The shareholders said we actually managed to get on board…a large portion of it is medical practitioners who like the concept and who bought into the company. We then have administrators at health funds who took up shares in the company, and the remaining shares came from the investment public, mainly via their broking communities as well as some applications from [inaudible 0:06:11.6] institutions, which we didn’t think we would get.
ALEC HOGG: The institutions that supported you with Presmed: are they back? Did they come back?
CARL GRILLENBERGER: Not entirely in the same way. It was a bit surprising that larger institutions such as Old Mutual and Sanlam applied for a substantial amount of shares and said ‘we want to keep it in our small cap portfolios, and we are very excited about the idea behind Advanced Health’.
ALEC HOGG: And ownership structure…you, being the entrepreneur – the front man – are you the biggest shareholder?
CARL GRILLENBERGER: I’m indirectly the biggest shareholder, yes.
ALEC HOGG: Do you have control of the business?
CARL GRILLENBERGER: Between my family and I, companies, and trusts, we have 49 percent of the company, but the intention – should we get the opportunity for a takeover or something like that – is to reduce that shareholding. We are not necessarily going to try to maintain a 49 percent shareholding, but it’s a good shareholding to start with. Gradually, as the company grow and we issue more shares for acquisitions for example, then we can work on a lower percentage.
ALEC HOGG: So from your perspective, owning 49 percent right now, you’re not saying this will always be a family business. We will always control this. There is no takeover premium that you can ascribe to the stock. In fact, if there were an irresistible offer, you’d be able to make your decision as the controlling shareholder.
CARL GRILLENBERGER: Definitely, yes. However, our main objective is to grow the business. What is good for the business to start in a lower shareholding percentage for ourselves, we believe would be reflected in a better price for a lower percentage of shareholding. It’s not the percentage you hold in the company, but rather the gross the company can generate, and because of that gross, we are quite prepared to bring our shareholding down.
ALEC HOGG: At what level would you be comfortable?
CARL GRILLENBERGER: As low as five percent. That’s what happened with our previous listing – Presmed – we had controlling shareholding of over 30 percent. Eventually it dropped down to just above five percent, and we were completely satisfied with it.
ALEC HOGG: And you were able to do that through acquisitions?
CARL GRILLENBERGER: Absolutely.
ALEC HOGG: What about in this area, do you have good acquisition opportunities?
CARL GRILLENBERGER: Yes, as soon as we started to create awareness, people came back and came forward and said ‘don’t you want to be involved in this? This is an existing facility and there are opportunities’. The realistic situation that we have to look at is a fair and reasonable price. Many of these companies or parties just believe that because they have an ideal facility for which we can make an acquisition, that the price should be higher. We are however, going back to our accountants and basically, looking at what is a fair price we can offer for these things in order to generate value for the shareholders.
ALEC HOGG: How did it go this morning? You’ve literally been listed for about half an hour.
CARL GRILLENBERGER: We were very happy. Firstly, before the listing we were extremely overwhelmed and excited about the volume of applications we received. This morning, looking at the start of the listing with the share price being quoted as well as the volume, the advisors here from the Johannesburg Stock Exchange that we have an excellent listing because there’s a lot of volume on the first trade. Hopefully, we can take this company forward on an active basis because that’s what we want to achieve.
ALEC HOGG: Was there much of a premium on what the shares were issued at?
CARL GRILLENBERGER: The shares were issued at a price of R1.00 per share. The price opened at R1.26 per share and traded up to R1.35 per share, so I feel there’s a nice mark-up/profit for those who want to take an initial profit and the investors who were lucky enough to get shares should be happy with what they’ve achieved on day one.
ALEC HOGG: And around this level: R1.20/R125, are you comfortable to be doing acquisitions and issuing stock at that level, or would you like to see it a bit higher yet?
CARL GRILLENBERGER: We looked at the valuations of the company before the time and the valuator said we could look into a longer-term price of round about the region of R1.50. However, if an opportunity comes to do an acquisition and the property or the party we’re acquiring has a fair and reasonable price, I don’t see why we shouldn’t do that type of transaction at a price of R1.30 per share.
