UK private equity firm CapVest enters race for IVF giant Virtus Health with $649m bid

UK private equity firm CapVest enters race for IVF giant Virtus Health with $649m bid

Photo: Virtus Health

Assisted reproductive services multinational Virtus Health (ASX: VRT) has found itself in a love triangle today as UK-based CapVest Partners enters the fray with a $649 million takeover bid, upping the ante by 7 per cent on BGH Capital's attempt that has been ongoing since December.

CapVest has made a non-binding proposal to acquire 100 per cent of Virtus shares for $7.60 each, alongside an alternative arrangement to acquire 50.1 per cent off-market at $7.50 per share.

The offer, to be funded with a mix of debt and equity, is still subject to due diligence and would require a unanimously favourable recommendation from the Virtus board.

After completing their assessment of the BGH offer with the help of financial and legal advisers, it appears Virtus' directors couldn't conceive of accepting that offer now that CapVest has entered the equation with a proposal that is "attractive for shareholders in the context of a change of control transaction and superior to the BGH Proposal".

Considering the latest offer represents a 46 per cent premium to VRT shares prior to BGH's offer, the Virtus board has agreed to give CapVest a period of exclusive due diligence to facilitate developing a binding offer.

"Subject to Virtus and CapVest agreeing an implementation deed on terms acceptable to Virtus, it is the Virtus Board’s intention to unanimously recommend that shareholders vote in favour of the scheme and accept the alternative transaction if the consideration per Virtus share under the scheme is at least $7.60 and under the Alternative Transaction is at least $7.50, in the absence of a superior proposal and subject to an independent expert concluding that the scheme and the alternative transaction is in the best interests of Virtus' shareholders or fair and reasonable, as applicable," Virtus said in a statement.

"In addition to a period of exclusive due diligence, Virtus has agreed under the Process Deed to pay a fee of $2 million to CapVest in certain circumstances including in the event that CapVest provides a fully documented, financed and binding offer that has been negotiated in good faith with Virtus reflecting the terms of the CapVest Proposal by an agreed date and Virtus elects not to proceed with that offer.

"That fee increases to $4 million if the Virtus Board recommends a superior competing proposal within an agreed timeframe."

The proposed VRT share price is at a slight premium to the 52-week high achieved in August of $7.47 for the in-vitro fertilisation (IVF) and day hospital company, which is one of the top five assisted reproduction services providers globally with market-leading positions in Australia, Ireland and Denmark, as well as a growing presence in Singapore and the UK.

In August the company also announced plans to acquire Adora Fertility from Healius (ASX: HLS) for $45 million, but that was waylaid by concerns from the competition watchdog that ultimately led to a withdrawal shortly after BGH put its takeover offer on the table.

The acquisition would have added four fertility clinics and day hospitals in new regions for Sydney-headquartered Virtus, one of the world's top five assisted reproductive services companies with 40 clinics in Australia, Ireland, Denmark, the UK and Singapore, as well as seven day hospitals here in Australia.

Today's news also coincides with the lifting of a temporary suspension on IVF treatments in Victoria  which would have ceased certain procedures in metropolitan Melbourne and major regional cities across Victoria from 12 January to 12 April 2022.

One of Virtus' competitors, Monash IVF Group (ASX: MVF) welcomed the announcement that has allowed it to recommence some services today, with the remainder starting back up again on 26 January.

"Monash IVF is pleased IVF procedures will recommence and the Company is focussed on informing patients of their options to recommence their treatment and ensure sufficient workforce and resources are in-place to meet demand," the company said.

MVF shares were up 4.52 per cent at the market close.

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