An independent expert says a $2.86 billion offer for Symbion Health by Healthscope is in the best interests of Symbion shareholders.
And they might well say that; but the figurative gorilla in the corner of the room in this transaction will hopefully let everyone know what it wants later this morning.
One time dancing partner with Symbion, Primary Healthcare, owns around 13% or so of SYB, enough to block the proposed scheme of arrangement mechanism for completing the merger with HSP.
Primary Healthcare releases its 2007 results in Sydney at 11 am today and will presumably tell the world what it wants from the company (Symbion) or companies (including Healthscope).
You don't spend upwards of $300 million, equal to around 20% of your market cap, to take a long term minority stake in a company on its way to a merger.
Relations between SYM and PRY are not cordial. Around a year ago they had a chat about Symbion buying a business from PRY.
Symbion walked away from the deal; things were said to the media and analysts in briefings and PRY wrote a very narky letter to the Australian Financial Review rejecting any imputations that Primary was asking too much. PRY pinned the blame for the deal failing firmly on Symbion.
Then in February of this year PRY waded into the market to pick up a stake in SYB and tried to do a 'merger of equals' deal with Symbion. That failed because Symbion pointed out that Primary was much smaller than it and therefore SYB shareholders were being stiffed in the deal with no control premium in any merger.
The failure of that deal naturally ruined the relationship and when HSP and SYB revealed their proposed partnership around May of this year, it was only a matter of time before PRY hopped into the market and quickly went past the 5% disclosure level in SYB, and then to just under 10% for a week before boosting the holding to13.65%.
And that will be enough to spite any deal: but that would also then drop the SYB share price (the purchases have been made well above $4.10 each) and any fall would produce unwelcome losses for Primary and its CEO, Ed Bateman.
So whatever SYB and HSP say to shareholders, they know they have to deal with PRY, one way or another.
It has bought a seat at the table much in the same way that BlueScope Steel crashed the Smorgon OneSteel merger and walked away with sort of what it wanted (but had to spend $1 billion to get Smorgon's steel distribution business).
The abortive dealings just under a year ago between PRY and SYB were over Primary's pathology business. Does PRY want some of the assets in this area that HSP will have to get rid of, or is there a much bigger aim?
PRY knows the ACCC holds some reservations about parts of the proposed merger in the form already announced.
Yesterday's statement to shareholders in SYB said:
"The independent expert, Ernst & Young has concluded that the Scheme is in the best interests of Symbion Health shareholders," Symbion said in a statement.
"The Symbion Health Board unanimously recommends that shareholders vote in favour of the Scheme, in the absence of a superior proposal."
The report was contained in Symbion's explanatory memorandum detailing the scheme of arrangement with Healthscope which was released yesterday.
Under the Scheme, Symbion shareholders will receive cash and scrip with an implied value of between $4.36 and $4.561 per share, including the cash amount of any Symbion 2007 final dividend.
This represents a 25% to 31% premium to Symbion Health's three month undisturbed average share price, Symbion said.
But SYB shares continue to trade much lower: they were around $4.06 yesterday, off 5c with HSP down 1c to $5.40 and Primary off 10c to $11.97.
At around $4.06, compared to the range of $4.36 to $4.56, the market is really saying, the deal isn't a goer until Primary's goals are sorted.
