At last Primary Health Care has revealed the colour of its money and put a bid on the table for Symbion Health.
After months of posturing and sharemarket games, Primary said it would bid a conditional $4.10 a share for Symbion.
Primary is Symbion's major shareholder with a 20% stake and the offer values Symbion at $3.5 billion, including debt. The cash value is around $2.35 billion.
There's no share alternative, which means the offer will not be attractive to small shareholders in SYB who would want the script to be able to rollover their capital gains tax liabilities.
The cash offer is aimed at bigger shareholders, especially hedge funds who have been playing in Symbion shares since Healthscope launched its first takeover deal earlier this year.
The offer is subject to a number of conditions, including a minimum acceptance condition of 90% and the latest Healthscope deal not being put to Symbion shareholders.
Primary CEO, Ed Bateman, said the offer was "clearly superior" to a proposal put to Symbion by Healthscope.
"Primary believes the all-cash offer is highly attractive for Symbion shareholders," Dr Bateman said.
"Primary's all-cash offer provides certainty of value for Symbion shareholders, as well as delivering an attractive premium to the top end of the independent expert's value range for Symbion shares of $3.91 per share, which includes a premium for control.
"The combination of Primary and Symbion will provide and produce significant value for the shareholders of each company and create a leading provider of healthcare services in Australia."
The Primary offer could fall over if Symbion shareholders approve the proposed sale of Symbion's diagnostics assets to Healthscope.
Further, Primary says approval of the Healthscope proposal must not be put to a meeting of Symbion shareholders, unless Symbion has obtained favourable rulings from the Australian Taxation Office in respect of capital gains tax rollover and demerger relief five business days beforehand.
Primary said the acquisition of Symbion will strengthen its position in the medical centres, pathology and diagnostic imaging businesses.
It will also expand Primary's geographic coverage, enlarge and diversify its earnings base and provide synergies and other operational improvements.
There's no mention of any perceived ACCC problems, but the Commission will look closely at the deal.
Primary estimates annual savings before interest, tax, depreciation and amortisation (EBITDA) of $95 million to $105 million and will fund the offer with debt and equity.
It's planning a placement of 15.5 million shares and a renounceable rights offer, after its offer is declared unconditional.
Primary said it has underwritten commitments for debt and equity funding to satisfy in full the cash consideration. ABN AMRO Bank NV Australian Branch, Calyon Australia Ltd, Credit Suisse (Australia) Ltd, National Australia Bank Ltd and Deutsche Bank AG are the funders. Primary's equity raising will be underwritten by Credit Suisse (Australia) Ltd, ABN AMRO Rothschild and Deutsche Bank AG.
Left unstated in the takeover presentation to the market yesterday was what would happen to the real growth business in Symbion: its consumer pharmacy, vitamins and distribution businesses that were to be sold to the private equity groups under the HSP proposal.
Dr Bateman told analysts that these would be sold off to trade buyers or private equity groups, such as the ones in Healthscope's bid.
Under the Healthscope proposal, Healthscope planned to buy Symbion's pathology, diagnostic imaging and medical centres businesses in a scrip deal worth $1.6 billion and assume about $900 million of Symbion debt.
Private equity firms Ironbridge Capital and Archer Capital would take Symbion's consumer and pharmacy services businesses for $1.15 billion in cash. That would be done via a scheme of arrangement and Primary indicated it would not vote for that, which would mean almost certain defeat.
Healthscope and Symbion have said that the two-pronged proposal gave Symbion an implied value of $4.23 to $4.43 a share.
The deal has been endorsed by the Symbion and Healthscope boards, but Primary had indicated it would vote against it.
The proposal is due to be considered by Symbion and Healthscope shareholders at separate meetings on November 30.
Primary cannot block the sale of the diagnostics business because that requires only the approval of 50% of SYB shareholders: the scheme of arrangement, like the first Healthscope merger deal, required approval of 75% of SYB's shareholders.
Primary used its 20% to vote it down, with some scattered support from other shareholders.
Primary began proceedings in the Federal Court Last month to block the sale of Symbion's assets. That's due in court next Thursday.
Primary has previously expressed interest in some of Symbion's diagnostics assets.
Primary shares were in a trading halt while the placement was organised. It last traded at $12.29. Symbion closed at $4.12, up 12c; Healthscope ended down 9c at $5.39.
