ACL flags no ‘material change’ to labs in takeover tilt for Healius but says there will be job losses

Despite failing to gain support of two major Healius shareholders, ACL is steaming ahead with a hostile reverse takeover of its larger rival.

Australian Clinical Labs says there will be “no material change” to the pathology collection centre footprint under its proposed takeover of bigger rival Healius, but conceded there will be job losses.

The Medical Scientists Association of Victoria – a branch of the Health Services Union which represents pathology workers – is concerned ACL will embark on a mass staffing cull as part of its plan to save $95m in costs if its merger with Healius proceeds.

But ACL is facing significant challenges in its nil-premium takeover bid for Healius, after two of Healius’s biggest shareholders, Perpetual Investment Management and Tanarra – which together own more than 21 per cent of the company – rejected the proposal, branding it “unattractive”.

The deal is also subject to approval from the Australian Competition and Consumer Commission and some analysts say the potential regulatory intervention and the forced sale of some laboratories may cut the quantum of the cost savings ACL is targeting.

Regardless, Medical Scientists Association of Victoria secretary Matthew Hammond said the takeover bid has created uncertainty for pathology workers.

“We do not believe that a pathology provider should be proud of a plan to generate savings of this scale as we can only see service reductions, job loss, poorer turnaround times and poorer patient safety being the result of such a plan,” Mr Hammond said.

“The MSAV holds significant concerns about ACL’s business decisions and practices with respect to its scientific workforce, and operation within public hospitals. Based on previous practices with public health contracts held by ACL we continue to believe they are more concerned with profits than providing the best quality service to the public.”

ACL rejected the union’s claim that a takeover of Healius would lead to poorer patient care but indicated there may be some redundancies where there is duplication. The company is yet to determine a final structure of the merged group, pending a strategic review of Healius’s operations, assets and corporate footprint.

“While ACL is committed to no material change to the collection centre footprint of the merged group across Australia, it is logical to reorganise some overlapping laboratory assets to provide a better and more sustainable service for the community,” an ACL spokesman said.

The union representing pathology workers is concerned ACL’s proposed takeover of Healius will lead to job losses.

“In particular, services in regional areas will be more efficient through enhanced access to services and improved turnaround times.

“While some duplicated roles may ultimately be affected, ACL has made it clear that it will seek to minimise job losses through redeployment of employees into other parts of the merged group’s operations. In addition, the current tight conditions in the Australian labour market mean there is an ongoing shortage of people for available roles.”

About $31m, or 33 per cent, of the expected cost savings are expected to be generated from the consolidation of the laboratories to reduce labour and rent, and “maximise leverage of fixed costs”, ACL wrote in its replacement bidders statement lodged late last Friday.

“It is expected that the merged group’s enhanced strength in its financial profile will enable the merged group to accelerate investments, with the aim of enhancing and expanding the range of patient and doctor services that it provides,” ACL wrote in its bidder statement.

ACL has proposed an all-scrip takeover, which involves offering 0.74 ACL shares for each Healius share. This would equate to Healius and ACL shareholders owning 68 and 32 per cent respectively of the new entity.

ACL said this represented a nil-premium based on volume weighted average price since Healius released its half year results on February 28 and its closing price on March 17 – the last trading day before it made its offer.

Since it lobbed the bid, however, ACL shares have fallen 2.5 per cent to $3.51, while Healius has risen 10.8 per cent to $3.08. The offer therefore implies a current value of $2.60 for Healius’s shares.

The Takeovers Panel declined a request from Healius to conduct proceedings, given the company is subject to a “laundry list” of “overly restrictive” conditions during the six-month offer period.

But the panel was concerned about the quantum of the cost savings ACL claimed, prompting ACL to submit a replacement bidders statement.

Under the revised statement, ACL said it could deliver most of the synergies – $88m of $95m – if it could only get 50-90 per cent of Healius shares and not move to compulsory acquisition.