Ebos announces $1.1 billion Australian acquisition

NZX-listed Ebos Group is set to become this country’s third biggest company if a $1.1 billion deal to acquire Australia-based Symbion succeeds.

The company has announced a $367 million capital raising to fund the cash portion of the acquisition. The remainder of the purchase price – $498 million – will be satisfied through an issue of new Ebos shares to Symbion’s parent company, Hong Kong conglomerate The Zuellig Group.

Ebos is a healthcare and animal care products company with a market capitalisation of $524 million and most recent reported profit of $14.6 million.

In a statement today the company says it intends to acquire Symbion, a 100% owned subsidiary of Hong Kong company, The Zuellig Group Incorporated.

Symbion, or Zuellig Healthcare Holdings Australia, is a leading pharmaceutical wholesaler and distributor.

Ebos, which built a successful business distributing products such as health consumables, says a successful acquistion will see the company become the third largest New Zealand listed company by revenue – behind Fonterra and Fletcher Building). 

The deal is said to be one of New Zealand’s largest private sector transactions in recent times.

Ebos intends  funding the cash portion of the deal with an underwritten share placement to institutional investors, a 7 for 20 pro-rata renounceable entitlement offer and an extension of Ebos’ debt facilities.

The remaining $498 million of the purchase price is to be satisfied through an issue of new Ebos shares to Zuellig.

The agreement is subject to certain conditions including Ebos shareholder approval at a special meeting in Christchurch on June 14.

Ebos says the deal will see it transformed into the largest and most diversified Australasian marketer, wholesaler and distributor of healthcare, medical and pharmaceutical products by revenue and a leading Australasian animal care products marketer and distributor. 

“Whilst combined revenue is initially expected to be $6 billion, looking forward, the increased scale and complementary nature of both businesses is expected to open up additional revenue opportunities and operational efficiencies,” the company says.

Ebos managing director Mark Waller says the deal follows months of due diligence.

“We have had a long and successful relationship with the Zuellig family. Ebos acquired PRNZ from  Zuellig in 2007. The Symbion transaction continues that relationship, with Zuellig becoming a 40% shareholder in the enlarged group on mutually agreed terms.

"Zuellig’s decision to retain this significant investment reflects the strong alignment between both parties, and a shared vision for the future of the combined company in the Australasian market.

“Symbion has a strong record of growth and profitability as does Ebos. It has a diversified earnings stream in pharmacy, hospital and animal care, and is a great fit with Ebos’ core business competencies in both countries.

"On the animal care side, Symbion’s veterinary business Lyppard will sit well alongside our recent acquisition of Masterpet.

“We are bringing together two businesses that are very well matched geographically and operationally and are leaders in key segments in their respective markets.

"We see this transaction as a rare and transformational opportunity for Ebos and its shareholders.”

An independent report compiled by Northington Partners says “the purchase price of $865 million [for Symbion] sits approximately 15% below the mid-point of our valuation range“. 

It concludes that the purchase price is attractive from Ebos’ point of view.

Key points:

The purchase price of Symbion will be $865 million, excluding the transfer to Ebos of existing Symbion debt. (approximately $230 million).

The cash portion of the purchase price ($367 million) will be funded through:

• an underwritten institutional placement of shares ($90 million) and an underwritten pro-rata renounceable rights issue to Ebos shareholders ($149 million); and
• new debt facilities ($140 million), with the remainder of the purchase price ($498 million) being satisfied through an issue of  new Ebos shares to Zuellig.

In addition Ebos will assume $230 million of Symbion’s net debt. This assumption of debt, combined with the purchase consideration, results in the approximately $1.1 billion enterprise value ascribed to Symbion.

The equity raising is fully underwritten and managed by Forsyth Barr Group Limited and UBS New Zealand Limited.

Ebos directors have resolved to make a taxable bonus issue to Ebos shareholders at the ratio of 2 for 53 with a record date of 6 June 2013. This will allocate available imputation credits that would otherwise be lost due to the forthcoming change in shareholding. 

A Special Meeting of shareholders is to be held in Christchurch at 10.00 am on 14 June 2013. Shareholders will also be asked to approve the appointment of two Zuellig nominated Directors, Peter Williams and Stuart McGregor, to the Ebos board.

dbridgeman@nbr.co.nz