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Australia's Healthscope gets $3.3 billion Brookfield approach, sparking bid war hopes

Reuters  |  SYDNEY 

By Byron Kaye

SYDNEY (Reuters) - Canadian investment firm made a $3.3 billion approach for Australian hospital group Healthscope, trumping a local buyout proposal and sending shares of the target up to a two-year high on Monday.

The approach, disclosed by in a statement, sets the scene for a takeover battle for the No. 2 Australian which has seen its shares slide due to high debt and a shift back to public after a scandal in the private sector.

New Australian player BGH Capital, led by former executives of and Macquarie Group Ltd, made an approach worth $3.1 billion on April 26. Pension fund AustralianSuper is partnering BGH in that proposal.

shares rose 4.9 percent in a flat overall market by midsession. The stock was trading at A$2.59, its highest since April 2016, and higher than Brookfield's A$2.50 indicative bid, a sign investors expect a bidding war.

"The entry of Brookfield adds to bidding tension and (I) expect the BGH-AustralianSuper consortium will most likely increase its offer bid," said Chris Kallos, a analyst at Morningstar.

said in the statement its board would assess both proposals. It added that Brookfield's proposal came with a condition that effectively prevents AustralianSuper from voting against its offer if the target accepted it. AustralianSuper has a 14.5 percent stake in Healthscope.

BGH and AustralianSuper said they disapprove of Brookfield's proposal, adding they would not be swayed by the Canadian firm's special condition.

"All members of the consortium will reject, vote against or not accept any proposal for the acquisition of Healthscope shares that may be put forward by any other party," they said in a joint statement.

"The BGH-AustralianSuper Consortium is not supportive of the proposal from Brookfield and is not interested in rolling over into it," the statement added.

The deal would continue Brookfield's rapid growth in the world's twelfth-largest economy. If Brookfield buys Healthscope, it would be the biggest takeover of an Australian company by a since a consortium including Brookfield paid A$9 billion for rail and in 2016.

Brookfield declined to comment.

Last week, Canadian landlord Properties REIT said it paid $312 million for a 10 percent stake in Healthscope. also declined to comment on Monday.

Healthscope was a high-profile listing in 2014, with its shares rising steadily amid hopes that it would benefit from the country's ageing population and a heavily state-subsidised health system.

But investors started selling the stock in 2016 after accused private health insurers, which fund patients for companies like Healthscope, of withholding payouts to policyholders, prompting more patients to opt for the public system.

Healthscope, which had embarked on building a new hospital in Sydney's north, issued two profit warnings, and when BGH lobbed its takeover proposal last month Healthscope shares were trading below their IPO price.

Brookfield is being represented by Lynch for the potential transaction, according to Healthscope, while Healthscope has hired

($1 = 1.3236 Australian dollars)

(Reporting by Chris Thomas in Bengaluru; Editing by Stephen Coates and Muralikumar Anantharaman)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Mon, May 14 2018. 11:30 IST