Primary Health Care is on the verge of taking control of rival Symbion Health after the Symbion board all but threw in the towel yesterday.
Primary yesterday revealed it had lifted its stake to 49.07% through its $4.10 a share offer, with just over 25% held in an institutional acceptance facility.
Primary has a 23% stake it has picked up from small Symbion holders. That's a poor return given the fall in the stockmarket.It started with 20% last year.
Primary has paid for that stake and faces significantly higher costs if successful and the institutions have to be paid out within a week, as promised.
While those institutional shares could be withdrawn quite easily, seeing Primary is so close to winning a 50.1% stake, the instos will wait and see what happens today.
Primary moved from 48% on Friday morning to that 49.07% level by close of business Friday. Another increase of the same magnitude would see it over the line today when the stake is revealed before trading.
Primary yesterday also revealed a 23.7% drop in interim net earnings to $20.42 million, compared with the $26.76 million earned in the first half of the 2006-07 year.
Earnings before interest, tax, deprecation and amortisation (EBITDA) rose 23.6% to $65.78 million, while total revenue was up 14% to $155.03 million.
The profit fall was caused by an extra $37 million in costs (financing, advice and other fees and charges) associated with the Symbion bid. Primary built up a 22% stake in a long process from the start of 2007.
Around $22 million were taken to account in the latest half and another $15 million will be allocated if the bid is successful.
Analysts said the costs associated with the takeover were high; with the company only holding an average 22% stake in Symbion in the December half. Additional interest costs are expected this half, along with a lower cost savings estimate.
As well Primary will probably have to find new buyers for the consumer and wholesale business of Symbion now that the deal with two private equity groups has expired.
In a statement to the ASX yesterday Symbion said that "If Primary Health Care Limited receives formal acceptances under its takeover offer for Symbion Health that results in it having a relevant interest greater than 50.1% and declares its Offer unconditional (including in relation to funding), the Symbion Health Board will recommend that Symbion Health shareholders should accept Primary's unconditional Offer.
"In these circumstances, the Symbion Health Directors would accept Primary's Offer in relation to the Symbion Health shares they own or control. Primary's Offer is currently scheduled to close on 21 February 2008."
Mr Paul McClintock, Symbion Health Chairman said:
"Last Thursday the Symbion Health Board announced that it would reconsider its recommendation in the event that Primary achieves interests in Symbion Health of greater than 50.1% and declares its Offer unconditional. This review has been completed and the Symbion Health Board has determined that in these circumstances it will recommend that Symbion Health shareholders accept Primary's Offer.
"The key reasons for the Board's previous rejection of Primary's Offer – being that it did not adequately compensate Symbion Health shareholders for the value of the strategic benefits and synergies which Primary expects to realise from acquiring Symbion Health, it was highly conditional, and the Symbion Health business had strong prospects going forward under the current management team – will have all changed significantly.
"The sharemarket has become increasingly volatile, falling 13% since Primary's Offer was announced, which has increased the risk of a decline in Symbion Health's share price upon the close of Primary's Offer, and has impacted the Board's view on relative value in the current environment. If Primary's Offer becomes unconditional all Symbion Health shareholders have the opportunity to receive $4.10 cash per share, if they choose to do so. It has also become evident that it is unlikely that any superior offer for Symbion Health will emerge in the foreseeable future.
"Furthermore, if Primary controls more than 50.1% of the shares in Symbion Health it will be able to cast the majority of votes at a general meeting of Symbion Health. This would likely result in a new Board and management team controlling the strategic direction of the businesses of Symbion Health.
"Robert Cooke and his management team have made significant progress in Symbion Health's businesses over the past two years, improving the company's performance and positioning it to be a key beneficiary of industry consolidation. Furthermore, they managed to ensure that the Company has continued to perform throughout this process.
"In addition, those shareholders who have held Mayne shares since the time of the demerger would have realised significant value if the Primary Offer proceeds, with Hospira acquiring their Mayne Pharma shares for $4.10 cash per share and now Primary seeking to acquire their Symbion Health shares for $4.10 cash per share. This represents a total of $8.20 cash per equivalent Mayne share, compared with Mayne's share price of $3.53 prior to the announcement of the demerger in May 2005.
"Symbion Health and Primary have commenced discussions on an orderly transition of control of the Company in the event that Primary achieves interests in Symbion Health of more than 50.1% and declares its Offer unconditional", Mr McClintock said.
In a rare bit of positive trading, punters chased Resource Pacific shares higher yesterday after the NSW coal miner, Resource Pacific Holdings said it had started talks with another 'party' as it continues to reject a $1.08 billion bid from Xstrata Coal, a divisi
