Australia’s Healthscope Ltd on Friday said it has extended exclusive takeover talks with suitor Brookfield Asset Management by a month, and that a rival suitor remained interested, potentially re-igniting a bidding war.
The hospital operator has not yet committed to a binding A$4.5 billion (US$3.2 billion) offer from the Canadian investment firm. Still, the extension sent its shares up as much as 6.55 percent as it gave investors confidence a deal would proceed.
“There was concern the bid could be reduced or withdrawn post due-diligence if Brookfield uncovered something disappointing, given the operating conditions for private hospitals have been challenging,” said JPMorgan analyst David Low.
“But it’s indicated at this stage, having done due diligence, that it expects to proceed, so there’s a positive surprise in that.”
Profit at Australia’s second-biggest private hospital operator has been falling as the number of people buying private health cover has stalled. But the company’s hospital property portfolio has made it a target for suitors looking at the country’s aging population as a source of long-term income.
Brookfield’s exclusivity period was due to expire on Friday. However, the firm still needs to finalize due diligence, debt financing and a binding implementation agreement, and so Healthscope agreed to extend exclusive talks until January 18, the hospital operator said.
Brookfield told Healthscope it had “no reason to believe it would not be willing and able to proceed with the proposal for acquisition of all shares,” the target company said in a statement.
Healthscope stock was up 6.55 percent at A$2.19 in afternoon trade, versus a 1 percent decline in the broader market.
In a separate statement on Friday, Healthscope said rival bidder Australian private equity firm BGH Capital and its partners had told the hospital operator they were prepared to commence due diligence even though their A$2.36 per share indicative offer was rejected as “less attractive”. Healthscope said it would consider the matter.
“BGH (and its partners) are indicating they are still interested and I presume they will remain patient,” said JPMorgan’s Low.
Last month, Healthscope said it had provided due diligence materials to Brookfield after picking the Canadian firm’s A$2.585 per share offer, which valued the hospital operator at A$4.1 billion.
Representatives at Brookfield or BGH were not immediately available for comment on Friday.
Update: Reuters reported earlier this year that Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan were partnering with BGH in its Healthscope bid.
(Reporting by Paulina Duran in SYDNEY and Aby Jose Koilparambil in BENGALURU; Editing by Stephen Coates and Christopher Cushing)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)