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Connor Healthcare takeover of Acurity stalls as ComCom seeks extension

The offer will lapse unless Connor receives a minimum of 90 percent acceptance from shareholders by the closing date.

Suze Metherell
Wed, 05 Nov 2014

Connor Healthcare's takeover for the 29 percent of Acurity Health Group it doesn't already own has stalled after the Commerce Commission requested an extension past the offer's closing date.

Connor, which is made up of Acurity's three largest shareholders, has received approval from the Overseas Investment Office but the antitrust regulator has pushed out its deadline past the offer's closing date of Nov. 21, Acurity said in a statement. According to its website, the Commission's deadline its now Nov. 28.

The offer will lapse unless Connor receives a minimum of 90 percent acceptance from shareholders by the closing date. It currently stood at 78.05 percent, indicating about a 7 percent takeup from other shareholders. If it does receive the minimum threshold it will have a period of 30 days after the Commission's ruling to satisfy the regulator's conditions.

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 percent shareholder and Evolution the 25 percent shareholder, in Connor if the offer is successful.

The commission is reviewing whether the takeover would see reduced competition between other hospital operators, including Southern Cross Health, through its affiliated provider scheme and the government's Accident Compensation Corp, which runs the country's public hospitals.

The possible stall in the takeover comes after Connor upped its offer to $7.25 per share from its $6.50 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 KordaMentha, 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 $5.1 million premium to its current market value. The shares last traded at $7.20 apiece.

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

Connor has 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.

In August, 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."

(BusinessDesk)

Suze Metherell
Wed, 05 Nov 2014
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Connor Healthcare takeover of Acurity stalls as ComCom seeks extension
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