The battle for Symbion Health is over.
Or is it, with the competition regulator, the ACCC now raising potentially serious concerns?
Symbion said late yesterday that it had accepted a sweetened offer, thereby paving the way for the $2.9 billion buyout of the country's biggest health-care company.
The 'sweetener' was an extra $1, or rather an extra $42,000,001.
It came from the buyout firms Ironbridge Capital and Archer Capital, who are the partners of rival Healthscope.
Symbion said the offer was more than the a rival bid made by Sigma Pharmaceuticals and its partner called the CWC Entity, which was associated with corporate advisers, Carnegie Wylie.
Sigma and its partner had bid $1.085 million for the consumer and pharmacy services divisions (the wholesaling arm), compared to the implied value on the two businesses of $1.043 billion in the Healthscope, Ironbridge Capital and Archer Capital.
Under the terms of the agreement with Healthscope (HSP) it had two clear working days to top the Sigma offer with a "materially superior" offer, or Ironbridge and Archer would be supplanted in the offer.
The revised offer for Symbion's consumer and pharmacy services divisions was just one dollar more than the $1.085 billion that was offered on Monday by Sigma and CWC.
"(The) Symbion Health board has resolved that it (the Healthscope counter-proposal) is superior to the Sigma proposal," Symbion said in yesterday's statement.
Now, under the terms of the original agreement supporting the sale of the Symbion assets, Symbion is not allowed to consider any further revised offers for the consumer and pharmacy services businesses from other parties, including Sigma and the CWC Entity.
Symbion said that it had received a revised bid from Sigma and the CWC Entity, valuing the two Symbion divisions at $1.105 billion.
But this new Sigma joint bid was submitted after the June 18 deadline for proposals to acquire the Symbion consumer and pharmacy services divisions and could therefore not be considered.
Symbion said it would now go ahead with the HSP, Ironbridge and Archer deal.
Under the Healthscope offer, Healthscope would retain Symbion's pathology, imaging and medical centres divisions.
Analysts said that Healthscope and the IAC consortium could offer anything in excess of $1.085 billion and top Sigma, which is what happened.
That possibility led to this comment from a leading investment bank:
"On the face of it, Sigma/CWC appear to have a greater level of potential synergies (benefits arising from the acquisition), even after making consolation for competition restrictions, and therefore we expect would be able to offer more," Goldman Sachs JBWere said in a research note to clients.
"But has Sigma been too cute and played themselves out of the situation?"
The answer would appear to be 'yes' as Sigma and CWC should have made that higher bid of $1.105 million before the well telegraphed June 18 deadline.
Even so, that would have only been $60 million or so more than the HSP/Ironbridge/Archer implied offer. So an even higher, knockout offer might have been in order; if Sigma had really wanted the assets.
Sigma is trying to stay in the game, hinting at legal action while Symbion says everyone knew the rules and had to play by them. It was, in effect, a one-shot auction for Sigma.
But Healthscope has some work to do before it can push its offer to finality.
It has to meet competition problems in the Victorian pathology market, according to a statement yesterday from the ACCC, and some concerns elsewhere.
The Commission yesterday released a statement of issues in relation to Healthscope's proposed acquisition of Symbion's pathology, medical centres and imaging businesses.
The ACCC said its preliminary view was that the proposed acquisition was likely to raise competition concerns in the Victorian pathology services market.
The ACCC said the merged entity would be the largest pathology services provider in a market that was characterised by high barriers to entry and expansion and few substitute pathology providers.
"The ACCC considers the merged entity is likely to possess sufficient market power in the Victorian market for the provision of pathology services either by unilaterally raising prices for the provision of pathology services by moving away from bulkbilling patients or by decreasing the quality of pathology service provision to the minimum levels required by regulation," the ACCC said.
"The ACCC considers that smaller, niche pathology-service providers are unlikely to provide a competitive constraint on the merged entity."
According to the Commission, Symbion is the largest operator in Victoria's pathology market, and Healthscope was number two.
The merged entity would have about 54 per cent of the Victorian market.
The ACCC also indicated it believed that post acquisition, market structures in Victoria, Queensland and Western Australia were likely to increase the ability and incentive for "co-ordinated conduct" between the SYB-HSP merged entity and another major provider of pathology and diagnostic imaging services, Sonic Healthcare.
The ACCC anticipates making a final decision on July 25. HSP will now have to come up with a plan for meeting these concerns.
It may be tougher than it seems because of the commission's worries about the capacity for 'co-ordinated conduct' with Sonic (the logical buyer in Victoria) in those other markets.
"Co-ordinated conduct' is a euphemism for price fixing and other anti-competitive beahviour, it would seem.
Symbion shares closed two cents lower at $4.25 on Wednesday, Sigma fell six cents to $2.26 and Healthscope lost three cents to
