Investors yesterday took a second look at Tuesday afternoon’s news that Hills (HIL) plans to spin off its health solutions business and merging it with technology company Lincor Solutions to create a new listing on the Australian market.
Shares in Hills soared on the news, closing 52.8% higher yesterday at 53.5c, and touched a year high of 55 cents in the process.
But a day later and – the shares fell nearly 29%, or 15.5 cents to 38 cents. While there’s still a lot of value left in the price from Tuesday’s rise, investors realise that much of the fine detail of Hills’ plans remain to be settled.
They also know that if they are not a shareholder in Hills they have to buy Hills shares (and the risks that go with those securities apart from the health solutions business).
Hills shares will have to be held to qualify for the distribution, and then there will be the shares to be issued in the IPO.
Under the terms of the merger, Hills and Lincor, Inc. will demerge assets and know how to Lincor Limited, an entity to be listed on the ASX after the IPO. Hills’ shareholders will own approximately half of Lincor Limited following listing, with the remainder to be owned by Lincor, Inc.’s shareholders.
The specifics of the transaction are still to be advised and the entire demerger remains conditional at the present time, according to both companies on Tuesday.
But aged care problems apart (Estia etc), its clear that the health sector retains its appeal for investors, especially those with some exposure offshore – there seems to be this underlying drive to find a new Ramsay Health (whose share price has soared as its international expansion has grown).
Hills chair Jennifer Hill-Ling, who will be on the board of the new company, explained that while Hills’ expanding healthcare solutions operations had the potential to become a key profit driver, the global growth potential for the business was greater as part of Lincor.
“This proposed merger reflects our determination to create significant value for shareholders,” she said.
The newly formed company, which needs shareholder approval to proceed, plans to raise $30 million through an initial public offering on the ASX – hence the surge in the Hills share price.
Hills said that if the merger was given the green light the new company, which would be named Lincor Ltd, would have a global presence through its distributors in 22 countries with offices in Europe, the US and Australia.
Hills Health Solutions and Lincor Solutions already have a relationship with Hills has distributing Lincor’s patient engagement technology platform, together with its nurse call solutions, for the past two years.
The two companies also have won recent contracts for major Australian hospitals either together or individually.
Chris Cashwell, chief executive of Lincor Solutions, who will take on the top role at the new entity, said the transaction secured his company’s position in a key market.
He added that Hills’ nurse call and communications technology would complement Lincor’s patient engagement platform.
“It also creates a significantly larger recurring revenue base reflecting the combined business’ software as a service platform and managed service offering,” he said in Tuesday’s statement.
“The new growth capital to be raised (through the IPO) will also allow Lincor to accelerate its growth aspirations in the emerging global healthcare sector for patient engagement.”
Lincor, Inc. operates under namesake brand Lincor Solutions, which was established in 2003 and has a global presence servicing some 150 hospitals around the world Lincor, Inc. has offices in Ireland, France, Canada, the UK and the United States, and will make its debut in Australia through the strategic partnership with Hills Health Solutions.
