First it was Primary Health Care which attempted a ‘nil premium’ merger of equals with Symbion Health but failed. Now Healthscope has linked up with two private equity funds to offer a suggested $4.30 a share for Symbion in what is the long awaited next round of rationalisation of this sector.
The suggested bid at $4.30 a share from Healthscope (HSP) and the two local buyout firms, Ironbridge Capital and Archer Capital (which took over Rebel Sport) values Symbion at $2.8 billion.
Symbion said the now usual words for a deal involving private equity buyers: The offer was “unsolicited, incomplete and non- binding,” but was obviously complete enough for a suggested price of $4.30 to be revealed
Symbion shares closed at $4.11 on Monday and have been rising steadily recently as speculation grew about the shape of the company’s future.
The two buyout companies will take control of Symbion’s (SYB) pharmacy and the pharmaceutical and other products distribution business, a move which will delight rivals Australian Pharmaceutical Industries (API) and Sigma Pharmaceuticals because they will be joined by a financial and not a trade buyer who might have been prompted to cut margins to build market share.
Instead the businesses to be acquired from Symbion will be loaded up with debt like all good buyout deals and be run for cash flow and not earnings.
It would also rule the two companies out of launching a bid for the struggling API unless they want to be a consolidator in the drugs and pharmacy distribution business.
It’s also good news for the small fourth distributor, DHL which has a much smaller range than the larger companies, although a deal between the buyout companies and DHL (owned by the Bundespost of Germany) cannot be ruled out down the track.
The proposed deal has to be signed off on by the ACCC which will be concerned about any overlap between HSP’s hospitals business (it’s the second largest hospitals operator in the country) and the Symbion businesses it’s proposing to keep of pathology, diagnostic imaging and medical centres
Under the proposal, shareholders in Symbion and Healthscope would each own about half the combined company, after Ironbridge Capital and Archer Capital take control of Symbion’s pharmacy and consumer businesses. (The consumer business is the best performing part of SYB at the moment.)
This deal is around half a billion more than $2.3 billion proposal from Primary Health Care in February which foundered because Symbion wanted a takeover premium which would have its shareholders holding more than 50 per cent of the merged company. That was something Primary (PRY) wouldn’t countenance.
Symbion said it will evaluate the proposal and provide more information by late this month.
It is the second major deal to get this far with a price being produced. Last year linked buyout groups, CVC Capital Partners and CVC Asia combined to bid for the imaging group, DCA and took it private with the assistance of the management.
And Sigma made two passes at API with ‘indicative’ prices but wanted due diligence approval before committing to an actual price. This was after API ran into trouble.
The prices fluctuated around the $2.20 and $2.40 area but Sigma withdrew when it was clear that the API board was opposed. Sydney solicitor, Chris Murphy has acquired around 7.8 per cent of API in steady on market buying.
Symbion Health shares closed at $4.29 up 18c on heavy volume of almost 35.5 million shares; API shares closed at $2.32 up 12c; Healthscope shares ended 7c higher at $5.73; Primary Health Care ended on $12.14 up 2c and Sigma finished up 4c at $2.52.
