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Healius rejects $2bn takeover bid

Emma Rapaport with AAP  |  07 Jan 2019Text size      |  

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Australian hospital operator Healius has rejected an “opportunistic” $2.02 billion takeover offer from its largest shareholder, Jangho Hong Kong Holdings.

Jangho, which owns nearly 16 per cent of Healius (ASX: HLS), made an indicative cash offer of $3.25 per share on January 3, which saw an immediate 12 per cent share price spike for the company formerly known as Primary Health Care.

But on Monday Healius announced the offer was "opportunistic" and "fundamentally undervalues" the company, as well as being conditional on several regulatory approvals in both China and Australia including the Foreign Investment Review Board.

Healius shares were trading down -4.36 per cent at 11:16 AEST

As such, Healius chairman Rob Hubbard recommended shareholders take no action on the offer.

"The sources of funding are not apparent from the information provided by Jangho and the proposal is conditional on a number of regulatory approvals that are outside of the control of Jangho, including the approval of Chinese and Australian regulators," Healius said in a statement to the ASX.

Morningstar equity analyst Daniel Ragonese characterised Jangho's original proposal to acquire Healius for $3.25 per share as "convenient" – given shares in Healius have been depressed over recent months.

The bid represents a 33.2 per cent premium to Healius's last closing price. This, however, is well below a peak of about $3.95 in March last year.

Jangho's bid falls more than 7 per cent short of Morningstar's $3.50 fair value estimate.

"It [would have been] a shrewd bit of business for the Chinese company if they manage to pull it off," Ragonese says.

Ragonese believes Healius offers more value to shareholders as a standalone business

"The firm's large-scale medical centres generated dependable earnings, and its pathology division in particular enjoys competitive advantages," he says.

"Healius is leveraged to growing demand from Australia's aging population, and increased government focus on preventative health should help drive demand in pathology and radiography divisions."

Healius shares were trading down -4.36 per cent from the previous day close at 11:16 AEST. However, at the current price of $2.36, stocks are up almost 18 per cent from a near three-year low of $2.23 on December 31.

Primary Health Care, founded 30 years ago by the late Edward Bateman and operates pathology, medical centres, IVF, imaging and day hospitals, changed its name to Healius as part of a rebrand late last year.

In its most recent company update published in October last year, Morningstar said it expected earnings per share growth of about 7 per cent a year on average during the next five years.

Healius is expected to report its first half results, performance and outlook in mid-February.

Price Chart | Healius Limited HLS