Consortium Returns To Healthscope With Renewed Takeover Bid

By Glenn Dyer | More Articles by Glenn Dyer

Act 2 of the same corporate play has seen private hospitals group, Healthscope on the end of a second unsolicited bid from BGH-AustralianSuper Consortium for a full takeover at $2.36 per share.

The offer price is a substantial premium on the last price on Monday of $1.78. Naturally, Healthscope’s shares leapt on Tuesday rising 19.6% to end at $2.13.

That tells us punters are not certain of the outcome – they don’t think a bidding war will happen and are questioning of the second bid from the BGH-led group.

The bid is mostly the same cast as in the first bid, with perhaps one new member, same principals, same sort of deal-highly conditional and non-binding.

The consortium tried “substantially the same” offer in April for $4.11 billion, but it was rejected in May by Healthscope.

AustralianSuper already owns 14.5% of Healthscope shares and its presence with BGH has effectively shut out other bidders, as it did in May when Canada’s Brookfield lobbed a rival indicative offer worth a suggested $4.35 billion.

AustralianSuper said no, ‘go away’ and away went Brookfield, now its back with BGH for another tilt and claiming the support of at least one other big shareholder

The BGH group claims Ellerston Capital, which owns 9.4% of Healthscope, has “indicated that it is supportive of the Board of Healthscope granting the BGH-AustralianSuper Consortium access to due diligence” and would vote in favour of the deal.

Healthscope says it has not yet heard from Ellerston and the board “will assess the proposal and will keep the market informed of any material developments in accordance with its continuous disclosure requirements.

“Healthscope shareholders do not need to take any action in relation to the proposal at this stage. There is no certainty that the proposal will result in a transaction,“ the board said in yesterday’s statement.

“The proposal is substantially the same as the proposal which was made by the BGH – AustralianSuper Consortium in April 2018 and which was rejected by Healthscope on 22 May 2018.

“Like the previous proposal, this proposal is stated to be a preliminary, non-binding indication of interest and specifies an indicative price of $2.36 cash per share. The indicative price will be reduced by the value of any dividends or other distributions declared, proposed or paid.

The proposal is subject to a significant number of conditions, including:

  • due diligence;
  • arranging debt financing for the acquisition;
  • each BGH – AustralianSuper Consortium member obtaining approval from its investment committee to submit a binding proposal;
  • negotiation and execution of a Scheme Implementation Deed;
  • receipt of all necessary regulatory approvals, including Foreign Investment Review Board and Overseas Investment Office approvals;
  • a requirement that the proposed sale of an interest in Healthscope’s property assets will not proceed and no other material assets are divested. Healthscope notes that it announced on 21 August 2018 that it proposes to establish a new unlisted property trust which will hold the majority of Healthscope’s freehold property assets and lease them back to Healthscope;
  • a requirement that Healthscope’s Hospitals division remains on track to report FY19 Operating EBITDA growth of 10% compared with FY18, consistent with market guidance provided by Healthscope at its FY18 result;
  • a requirement that, excluding proceeds from the sale of Asian Pathology and on the basis that the NSW State Government capital payment has not yet been received, Healthscope’s underlying net debt position as at 31 December 2018 is in line with that reported at the FY18 result;
  • a requirement that no recurring cash costs were classified as “non-operating expenses” in the FY18 result; and
  • a requirement that the Healthscope Board agrees unanimously to recommend that shareholders vote in favour of the proposed scheme in the absence of a superior proposal, subject to an Independent Expert concluding that the proposed scheme is in the best interests of shareholders.

The BGH – AustralianSuper Consortium has stated that the exclusivity arrangements amongst its members have been extended to 31 March 2019.

Whew! This one won’t fly either without more certainty.

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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