The conditions of a $1.58 billion bid from Australian Clinical Labs (ASX: ACL) are ‘overly restrictive and burdensome’ according to target Healius Limited (ASX: HLS), which has approached the Takeovers Panel for intervention in the matter.
Specifically, pathology services provider Healius submitted that competitor ACL’s bidder’s statement was ‘misleading’ and ‘inadequate in a number of respects’, while also including an 'unusually long offer period'.
As a result, Healius said the merger offer from its smaller rival was not taking place in an efficient, competitive and informed market, and that shareholders were not being given enough information to properly assess its merits.
Having received the off-market offer last Monday, Healius has since applied to the Takeovers Panel in an attempt to have the terms of ACL’s proposal altered and to restrain the suitor from dispatching its bidder’s statement until the regulator has made its decision.
Ultimately, the target claims ACL’s statement contravenes the Corporations Act.
In total there are 25 conditions, which have their own sub-conditions, including ones pertaining to unconditional Australian Competition and Consumer Commission (ACCC) approval and a minimum acceptance condition of 90 per cent.
According to the Takeovers Panel, a sitting panel has not been appointed to the matter at this stage and no decision has been made on whether to conduct proceedings at all.
“The Panel makes no comment on the merits of the application,” the Takeovers Panel said.
Involvement of the regulator comes two days after Healius updated shareholders on ACL’s bid, at the time noting it had reviewed the unsolicited offer ‘in greater depth’, but did not provide a formal target statement in response to the offer.
However, the company did highlight the statements made by its shareholders, including that of Perpetual Investment Management (ASX: PPT) - Healius’ largest shareholder with a 12.5 per cent stake - which said that ACL’s proposal was “unattractive in terms of its structure, certainty, and terms”.
Perpetual added the deal “could result in an inappropriate transfer of value from Healius shareholders to ACL”.
Another substantial shareholder Tanarra Capital, which owns 8.5 per cent of Healius, also believed the ACL bid to be lacking, and said it had ‘no intention to accept ACL’s offer’.
“Tanarra’s position therefore effectively guarantees ACL cannot achieve 90 per cent ownership and deliver on its promised synergies,” Tanarara Capital said.
“ACL has made clear from its own statements that it intends to have management control, and in all likelihood board control, of a combined Healius/ACL. Yet it is offering no control premium.
“To the contrary, ACL is seeking control at a discount to the pre-offer price for Healius, and a substantial discount to recent stock trading prices.”
If the two companies were to merge, the entity would become the nation’s largest pathology services provider, with 171 labs and 3,413 collection centres across the country.
Further, ACL - the smaller of the two pathology services providers - believes it can help its larger rival turn around its operations which posted a net loss of $28.7 million and earnings loss of $13.2 million in 1H23.
The potential deal comes more than a year after ACL acquired Medlab Pathology for $70 million, and would be the group’s sixth acquisition over the last eight years if successful – adding to its existing portfolio of Healthscope’s Australian pathology business, St John of God Health Care’s pathology business, Perth Pathology, and SunDoctors.
As a merged entity, ACL claims it would have a forecast an EBIT of $361 million for FY23 - more than double the combined FY23 EBIT of each of Healius and ACL on a standalone basis.
Without the merger, ACL expects an EBIT of between $68 million to $74 million in FY23, a significant drop-off from its $266.6 million result in FY22.
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