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With the board of fertility specialist Virtus Health (ASX: VRT) unanimously recommending shareholders vote in favour of a $706 million takeover from UK private equity firm CapVest at a meeting in June, the company that started the bidding war is lifting its game.
After already lifting its stake in Virtus to just shy of 20 per cent by mid-February, BGH Capital - a Melbourne-based private equity firm founded in 2017 by Robin Bishop, Benjamin Gray and Simon Harle -has today announced plans to acquire all VRT shares it does not already own or control at $8 per share, undercutting CapVest's offer of $8.25 per share.
The offer is set to be made by entities controlled by BGH including Oceania Equity Investments which aims to hold 40 per cent, and Bidco which is setting out to control the remainder of the IVF multinational.
Virtus is one of the world's top five assisted reproductive services companies with market-leading positions in Australia, Ireland and Denmark, as well as a growing presence in Singapore and the UK.
"As a cash only off-market bid that is conditional only on no “prescribed occurrences” occurring in relation to Virtus, accepting the Offer provides Virtus shareholders with a simple and attractive cash exit from their investment in Virtus with certainty regarding the tax implications," BGH stated.
In a response, the Virtus board said they were yet to evaluate BGH's latest bid but would be considering whether it could constitute a "superior proposal" under the terms of the transaction implementation deed signed with an entity controlled by CapVest.
If the BGH bidders are able to acquire 90 per cent of shares or more, they intend to compulsorily buy the rest, arrange for Virtus to be removed from the ASX, and replace the board with their own nominees.
The bidders' statement also includes plans to replace the existing debt facilities of the Virtus Group with a new financing structure designed to facilitate the continued growth.
"BGH Capital is in discussions with third party financiers regarding a potential refinance of the Virtus Group's existing debt facilities, however as at the date of this Bidders' Statement the details of any such refinancing have not been finalised," they said.
"BGH Bidders' current intention is to continue the current strategic direction of Virtus. In addition, BGH Bidders will seek to grow Virtus' business in the fertility sector organically and through other opportunities that may become available to it from time to time.
"BGH Bidders intend to consider and actively pursue growth opportunities, which may involve the strategic acquisition of other businesses in the fertility sector," the said, also emphasising a continuation of operations centred around quality patient experiences and outcomes.
The private equity firm also would plan a review of Virtus' business operations and organisational structure "to ensure Virtus has the appropriate mix and level of employees and skills to enhance the business going forward and to enable the business to pursue growth opportunities".
The bidders have also slated their intentions to engage with Virtus’ existing fertility specialists on their existing incentive plan structure, and will consider any improvements that would attract and retain specialist talent.
However, if the private equity firm can only acquire 50 per cent or less of Virtus, it would maintain the company's ASX listing and seek to appoint a proportionate number of nominees to the board.
Both competing bids have received Foreign Investment Review Board (FIRB) approval.
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