Connor Healthcare boosts Acurity take over offer to 38% premium on last share price

Acurity Health Group chief executive Ian England
Acurity Health Group 12-month price history (NZX.com)

Acurity Healthcare Group's [NZX: ACY] independent directors have unanimously accepted Connor Healthcare's takeover offer for the 29 percent of the company it doesn't own, after Connor boosted its offer by 75 cents per share to $7.25 a share.

Connor, which is made up of Acurity's three largest shareholders, upped its offer from $6.50 per share offer on July 25. The revised offer price sits in the middle of the $6.69 to $7.75 per share price determined in the independent valuation conducted by Korda Mentha, and is a 38 percent premium on its $5.25 share price before the offer.

The revised offer values Acurity at $129.4 million, a $14.6 million premium to its current market value. The shares last traded at $6.65 apiece.

Acurity's independent directors said they had accepted the offer in the absence of any higher bid, saying it is unlikely a higher offer will emerge. They'd previously advised investors to hold onto their Acurity shares after the share price rose above Connor's initial offer price.

Connor touted the cost of upgrading its flagship Wellington hospital up to earthquake code as too onerous for a public company, saying it would be better placed to absorb the cost than a publicly listed company.

Earlier this month, chief executive Ian England announced the appointment of a working group made up of specialists, directors and management to define what's needed to bring the hospital up to earthquake code and establish costs. While no definite figures were available, a recent review suggested the upgrade would cost between $45 million and $50 million, with a further $10 million needed to replace the current Wakefield Medical Consultant Centre.

In its target company statement, the independent directors note that Acurity has "excellent medium to long term prospects" but flag "significant short to medium term challenges, including the substantial capital expenditure required at Wakefield Hospital."

They give guidance for the current financial year suggesting that "ebitda and adjusted net profit after tax are likely to be a nominal improvement on the 2014 financial year's result."

The Korda Mentha report echoes the hospitals' short-term costs and long-term prospects, and says it is unlikely another offer will emerge.

Connor is owned by Sydney-based Evolution Healthcare, which took an 11 percent stake in Acurity last year at $5.50 a share and also owns Boulcott hospital in Hutt City. It has a takeover implementation deed with Acurity's majority shareholder, Austron, under which Austron will become the 75% shareholder and Evolution the 25% shareholder, in Connor if the offer is successful.

Austron is owned by the Stewart family and Royston Hospital Trust.

"We believe the offer price to be very attractive to shareholders who have seen meager total returns over the last four years," said Connor's spokesman, Mark Stewart. "We believe the lack of liquidity in the shares, the required capital expenditure on Wakefield hospital, the costs associated with the NZX listing and the lack of scale and institutional shareholder support means that Acurity is best suited to being an unlisted private company."

Sydney-based Evolution bought an 11 percent stake in Acurity last year, paying $5.50 a share, and also The Stewart family and Royston launched a successful partial takeover in 2012 at $6 a share.

The takeover offer is subject to conditions, including the 90 percent minimum acceptance condition and approvals from the Overseas Investment Office and the Commerce Commission. Connor has sent a letter detailing its takeover offer to shareholders, who have until Nov 21 to accept the offer, with independent directors advising shareholders to accept later rather than sooner, just in case other developments emerged.

(BusinessDesk)

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