Despite the Australian Competition and Consumer Commission approving the merger of hospitals operator, Healthscope, and pathology, medical centres and pharmacy services group, Symbion Health, the deal is not a happening thing, yet.
Two things may stop it: the attitude of major Symbion (SYB) shareholder, Primary Healthcare (PRY) and the Healthscope share price.
Both have emerged ascrucial, given the gathering slump in the market because of the credit market worries and subprime mess in the US.
The attitude of Primary, which has built a stake in SYB to 17.78%, costing around $470 million, will be important as, with a holding of that size, it can sink the merger, which will be attempted by way of a scheme of arrangement.
Primary and its CEO, Ed Bateman, has refused to give any indication of what might be wanted from Symbion to vote for the merger.
It is a form of green mail. It is felt the NSW pathology business of SYB might be a start and a way of getting PRY's nod.
But the real worry is the Healthscope share price and the weak markets.
In the market sell-off of the past week or so, the price has been fairly firm. But it shed 15c yesterday to $5.28.
That's below the key $5.30 value (it's a cash and shares offer from HSP) and if it remains below that for 10 days leading up to the scheme meeting, the merger will be off.
The meeting is expected next month.
It could also mean that Primary might be locked into Symbion, without influencing the fate of the merger.
The ACCC said late yesterday it had granted its approval after accepting an undertaking from Healthscope to divest a number of pathology businesses in the north-eastern and Gippsland regions of Victoria.
"The proposed acquisition, after taking account of the undertaking, is unlikely to substantially lessen competition under section 50 of the Trade Practices Act," ACCC chairman Graeme Samuel said.
He said there were some competition concerns in parts of Victoria where the merged entity would be the only or dominant pathology provider.
But Healthscope had also said it would divest pathology assets in the border city of Albury in New South Wales.
"Healthscope has undertaken to divest the Gippsland pathology business, Benalla pathology business and Albury pathology business that are operated by Symbion and the Wangaratta pathology business operated by Healthscope, as part of the proposed acquisition," Mr Samuel said.
Healthscope must sell the businesses to a purchaser approved by the ACCC.
Healthscope said the total annual revenues of the regional businesses to be divested was about $34 million and did not trigger a termination right under a scheme of implementation deed relating to the merger.
Symbion Health shareholders are scheduled to vote on the proposed merger with Healthscope on September 11, so the meter on the HSP share price starts at the end of August.
The markets had better rise in the next three weeks, otherwise the deal could be dead.
The Symbion board has endorsed the Healthscope proposal.
Healthscope managing director, Bruce Dixon, said he was pleased with the ACCC's approval.
"The proposal remains on track, and now we can move forward to the meeting," Mr Dixon said.
Healthscope's proposal involves paying $2.86 billion in cash and scrip for Symbion, and then selling Symbion's consumer and pharmacy services divisions to private equity firms Ironbridge Capital and Archer Capital (IAC consortium) for $1.085 billion.
Healthscope would retain Symbion's pathology, imaging and medical centres divisions.
