PRY Likes Symbion; Might Want More

By Glenn Dyer | More Articles by Glenn Dyer

The Australian healthcare industry is facing the prospects of more change after Primary Health Care, the country’s major medical clinic operator, emerged yesterday with five per cent of the much larger Symbion Health and suggested it might buy more.

Primary has put its money where its mouth is: spending $131 million to build its stake of more than 33.8 million Symbion shares.

And there are reports this morning that Primary could offer $4.65 a share for Symbion, which would value it around $3 billion.

The news broke after the close of trading so the impact on Symbion’s share price won’t be seen until later today but it rose 7c to $3.87 yesterday as the shares continued a recent mini-rally, obviously sparked by Primary’s buying. Volume was more than 5.7 million shares.

Primary shares closed down 6c yesterday at $13.20, on volume of just 9860 shares.

Primary’s move on Symbion came four months after it rejected Symbion’s offer to take over its pathology unit.

Primary said the Symbion shareholding gives it a “foothold to acquire more shares.” A confidential proposal has been put to Symbion by Primary,” it said in a statement released yesterday evening (full text below).

Primary also said Symbion was just one of a number of ‘domestic corporates’ it had been talking to about doing a deal of some sort. It said Symbion was one of the companies where the ‘synergies’ were ‘highest’

Symbion is the country’s second largest listed health care group with a market cap of $2.45 billion, compared to Primary’s $1.65 billion.

Symbion was spun out of the old Mayne Nickless and its former stablemate, Mayne Pharma was taken over by a US company for $2.55 billion in a deal wrapped up earlier this month.

Last year the private buyout group, CVC/CVA Asia bought the DCA company for around $2.7 billion.

And Australian Pharmaceutical Industries is on everyone’s list of companies to be snaffled, despite the bigger Sigma Pharmaceuticals withdrawing a suggested bid at $2.50 and then $2.20 a share. It never got past discussions as API rejected the Sigma approach.

Sigma is the biggest operator across the entire health care industry with its concentration on drug manufacturer, distribution and retail. It has a market cap of more than $2.6 billion and might be tempted into looking at Symbion, despite the tremendous competition problems involved (as they were with API).

API has been left stuck like a shag on a rock with a poor market rating after its financial problems last year, which continue to undermine its credibility.

Analysts say Primary’s sales have grown by around 20 per cent annually during the past five years, compared to some four per cent growth for Symbion.

Symbion, which was spun out of Mayne in late 2005, is the third-largest drugs wholesaler with 29 per cent of the market, behind Sigma and API.

It also has 75 pathology laboratories, 49 medical centers and 120 x-ray clinics, according to the company Web site.

Primary’s statement to the ASX read:

“The continued economic, social and demographic imperatives for consolidation of healthcare services are stronger now than when the process began more than a decade ago.

While the consolidation of general practitioner services is still in its early stages, in other areas of healthcare delivery – pathology, diagnostic imaging, hospital care etc – opportunities for consolidation are now more limited.

Primary has followed, and will continue to follow, its proven organic growth of medical centre development. At the same time, it has continued to look at all options available. Non-domestic expansion offers opportunities that are “cheaper”. This is often offset by a higher risk profile.

While Primary has its origin and focus in general practice services, it has more than 30 radiology practices, pathology turnover of circa $100m, more than 25 pharmacies, is the largest software provider to general practitioners in Australia, a range of Specialists clinics, and the second largest day surgery operator, i.e. a wide range of management experience in healthcare.

“In this context, continued consideration has been given to acquisition of or merger with other corporate groups that provide similar services.

“Examination over a number of years of corporate options for consolidation has indicated significant synergies available. With the scale of synergies, with a sufficient management in a wide range of healthcare areas to ensure successful outcomes and with a limit to the number of options available, Primary has had discussions with a number of domestic corporates.

“Primary has acquired a shareholding in Symbion Health Limited. This shareholding gives Primary an opportunity to participate in any upside in that group’s performance. This allows a foothold to acquire more shares if the company disappoints, or, general market conditions give rise to such an opportunity.

“It is one of the groups where there are the higher range of synergies available. A confidential proposal has been put to Symbion by Primary.

“The Symbion holding, Primary’s ability to continue its organic growth, together with Primary’s range of management experience allows Primary shareholders to share directly, or indirectly, the future consolidation that we see likely in the healthcare sector.”

………………….

And in an unrelated development colourful Sydney solicitor, Chris Murphy, has lifted his stake in the struggling distributor of drugs and other pharmacy products company, Australian Pharmaceutical Industries.

According to a notice filed with the ASX, Murphy’s company, Cardiac Jolt Pty Ltd has lifted its holding by around 3.5 million shares, to a new level of 6.83%.

Murphy and the company first told the ASX back in early December of their holding of 13.7 million shares or 5.33%. Cardiac Jolt said today it now held 17.56 millio

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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