Australian private equity firm BGH Capital and its partners lobbed a second A$4.1 billion (US$2.9 billion) bid for hospital operator Healthscope Ltd on Tuesday, this time with a top shareholder’s support.
Healthscope is a hot takeover target, lately posting falling profits, but seen by investors and its suitors as a long-term bet on Australia’s ageing population.
It rejected as too cheap an identically priced earlier offer from BGH and its consortium partners, as well as a higher one from Canadian investment firm Brookfield Asset Management, in May, refusing due diligence.
But on Tuesday Healthscope said it had received assurances from BGH that the repeated offer had the backing of No. 2 shareholder Ellerston Capital, giving it the support of almost a quarter of its register.
Healthscope shares soared 20 percent to a 7-week high following the announcement.
“It looks like a reasonable price,” said Morningstar analyst Gareth James, adding Ellerston’s backing for granting due diligence, plus a languishing share price heaped pressure on Healthscope to open its books to the bidders. “I think it’s unlikely that they would have come back for a second bid without believing that they’re in a stronger position than they were.”
The offer at A$2.36 per share is lower than Brookfield’s rejected bid of A$2.50 but 32 percent higher than Healthscope’s closing price on Monday. The share price jumped to A$2.17 on Tuesday, in a falling broader market, their highest since September.
Healthscope said it was assessing the proposal and added it had not heard directly from Ellerston about its support. BGH declined to comment.
Ellerston, which owns 9.4 percent of Healthscope, also declined to comment, as did pension fund AustralianSuper, part of the bidding consortium and Healthscope’s largest shareholder with a 14 percent stake.
The group behind the takeover approach also includes Canada Pension Plan Investment Board, Ontario Teachers’ Pension Plan Board and Singaporean sovereign wealth fund GIC.
Australia’s second-largest private hospital operator became a takeover target as shrinking patient demand and cuts to private health insurance payouts weigh on its profits and shares.
Investors and analysts see the problems as temporary, as demographic shifts underpin demand for elective surgery and hospital stays in the long run. But in the four years since it was floated, Healthscope has issued at least two profit warnings as Australians increasingly opt for public health services.
It reported in August that its annual operating profit had halved and outlined plans to spin off, sell and lease back some of its hospital real estate.
(Reporting by Tom Westbrook, Additional reporting by Rushil Dutta; Editing by Stephen Coates)
(This story has been edited by Kirk Falconer, editor of PE HUB Canada)