UPDATE: Major Acurity shareholders launch all-cash takeover bid
The three biggest shareholders of Acurity Health Group [NZX: ACY] have launched a cash takeover bid for the 29 percent they don't own, valuing the private hospital operator at $112.2 million, saying the firm faces a big struggle lifting its flagship Wellington hospital up to earthquake code. The shares rose to the offer price.
Connor Healthcare, an entity set up by principal shareholders the Stewart family, Royston Hospital Trust Board, and Evolution Healthcare, are offering $6.50 a share for the rest of Acurity, a 24 percent premium to Friday's closing price of $5.25, the company said in a statement. Connor spokesman Mark Stewart, whose family interests have bought and sold stakes in Ebos Group and Abano Healthcare Group, told BusinessDesk the cost of maintaining a listing and providing funders with insight into its margins didn't suit the business.
"It's a pretty difficult environment out there - Southern Cross is one of the major funders under its own pressure," Stewart said. "They're trying to continue their business at much lower prices and we're squeezed in the private hospital sector - surgeons are the ones effectively getting the money."
Connor anticipates being better able to absorb the estimated $50 million in capital expenditure needs to upgrade the Wakefield hospital in Wellington, before expanding the business to latch on to New Zealand's ageing demographic which will likely need increased spending on health.
In its long-term fiscal sustainability report, the Treasury predicts health spending to progressively rise to 10.8 percent of gross domestic product by 2060. The government department says the country will need to make choices as to what is publicly provided as that cost balloons with an ageing population, and new and more expensive technology extending life expectancies.
Stewart said that expansion could come from buying more hospitals, or partnering with surgeons or funders.
"The conclusion I've come to in healthcare is that partnerships are the way to get going," he said.
Stewart said New Zealand's health sector is about 10 years behind Australia, and Acurity will look to draw on Evolution's experience across the Tasman.
Sydney-based Evolution bought an 11 percent stake in Acurity last year, paying $5.50 a share, and also owns Boulcott hospital in Hutt City. The Stewart family and Royston launched a successful partial takeover in 2012 at $6 a share.
The takeover offer is expected to be sent to shareholders on Aug. 26, and will need minimum acceptances of 90 percent to allow Connor to exert the mop-up provisions. The deal will also be subject to approval from the Overseas Investment Office.
The shares climbed 24 percent to $6.50 on Friday, having decreased 3.5 percent this year. The company has net tangible assets per share of $5.368, according to NZX data.
In May, Acurity beat guidance as it boosted annual profit 55 percent, and said it anticipated growth in public sector funding due to capacity constraints for elective surgery in state-run hospitals.