No wonder the board of private hospital operator and pathology group, Healthscope, have grabbed a rich $6.26 a share takeover offer from private equity firms Carlyle Group and TPG Capital.
The deal is worth $2.7 billion all up, including debt.
It’s been nearly five years since Healthscope shares have been that high – in fact the decade high was $6.69 reached in September 2005, which is a long time ago.
So yesterday’s unanimous recommendation of the $6.26 per share cash offer from Carlyle and TPG, shouldn’t have come as a surprise.
The offer price was a 16% premium on the $5.40 close on July 16, but more importantly, it is a 39% premium to the $4.50 the shares were at before the private equity interest first emerged in mid-May.
Healthscope said the offer price would be reduced by any future dividends that Healthscope pays to shareholders before completion of the deal.
Healthscope shares took the hint, shook over market concerns the bid would not emerge and jumped 54c, or 10%, to $5.94 yesterday.
Carlyle and TPG will take over Healthscope via a scheme of arrangement.
"The board of Healthscope unanimously recommends that Healthscope shareholders vote in favour of the scheme at the scheme meeting, in the absence of a superior proposal and subject to an independent expert concluding that the scheme is in the best interests of Healthscope shareholders," Healthscope said in yesterday’s statement.
Healthscope said that following the receipt of proposals from parties after the share market had closed on July 16, the board had concluded that the consortium’s proposal provided the best outcome for Healthscope shareholders, both in terms of value and associated terms and conditions.
Healthscope said that subject to an independent expert concluding that the scheme is in the best interests of Healthscope shareholders, each director of Healthscope intends to vote in favour of the scheme.
The transaction is subject to various conditions, including Healthscope shareholder, court and other regulatory approvals.
"Following the receipt of a number of approaches in May, the board determined that it was in shareholders best interests that a formal process was undertaken to thoroughly evaluate whether a change of control offer, at a price and on terms that the board would recommend, could be secured," Healthscope chairman, Linda Nicholls, said.
"This process has maximised shareholder value through encouraging competitive tension.
"After careful consideration, the board has unanimously concluded that the consortiums offer provides shareholders with an excellent opportunity to realise considerable value from their investment in Healthscope.
"Whilst the board is of the strong belief that the company is well positioned to continue to deliver strong growth for shareholders into the future, the board determined that the relative certainty delivered by this cash offer at a substantial premium was in the best interests of Healthscope shareholders."
Private equity group, Kohlberg Kravis Roberts & Co (KKR), had also been interested in a takeover of Healthscope.
US-based Tenet Healthcare Corp also made a proposal to take over Healthscope at $5.80 per Healthscope share but withdrew its $1.84 billion bid, citing premature disclosure of non-public information regarding its interest in Healthscope. In reality Tenet’s big US shareholders objected to the offer being made.
For Healthscope shareholders, the deal has several major protections: there is no ‘market out’ clause in that the bid can’t be pulled if the stockmarket drops sharply.
And there’s no finance clause: the $1.7 billion for the deal has been arranged from 17 banks, so money is not a problem for the deal.
