BGH Capital lobs ‘circuit breaker’ off-market bid battle for Virtus
BGH hopes it has fired the final shot in the bidding war for Australia’s biggest IVF provider.
BGH Capital has lifted its offer for Virtus to $8 cash a share – or $684m – in an off-market takeover offer that seeks to go around the IVF provider’s board.
Frustrated by constantly being rebuffed in favour of London-based private equity firm CapVest, BGH has ditched a takeover by scheme of arrangement, appealing directly to shareholders’ hip pockets.
“Given the Virtus board’s unwillingness on multiple occasions to engage with us regarding our proposals to undertake due diligence with a view to agreeing a scheme of arrangement, we believe the only viable option to acquire 100 per cent of the shares in Virtus is to make an offer directly to shareholders via this off-market bid,” BGH said in its bidder’s statement.
Virtus’s shares jumped 1 per cent to $8.15 on Wednesday. This compared to a 0.5 per cent fall across the broader sharemarket.
The off-market takeover proposal is a move BGH hopes will act as a circuit breaker. It believes its offer is superior to CapVest’s off-market offer of $8.10 a share, given that includes a permitted capital return of $2.27.
While the Australian Taxation Office is yet to provide guidance, sources said there was a risk that $1.40-$1.50 a share of that permitted capital return would be an unfranked dividend. This would reduce the bid to between $7.55 and $7.76 a share.
CapVest has offered a high price – $8.25, less the 12c dividend Virtus declared on February 22 – via a scheme of arrangement.
Despite being endorsed by the board, that looks unlikely to proceed, given BGH has amassed a 20 per cent stake in Virtus and says it will use that holding to reject any CapVest bid.
“As the CapVest scheme requires 75 per cent of the votes cast by, and more than 50 per cent in number of, eligible shareholders to vote in support of the scheme and recognising that voter turnout at scheme meetings is often substantially lower than 100 per cent, there is significant uncertainty that the CapVest scheme will meet the required approval thresholds considering our stated intention to vote against the CapVest scheme,” BGH said in its bidder’s statement.
“We believe that our offer delivers shareholders with a significant premium to Virtus’s historic market price and superior certainty than the CapVest proposal. Today we have written to Virtus to ask for access to due diligence.”
Virtus’s board said it would “consider the BGH takeover bid and update shareholders in due course”. “Virtus has now received seven competing proposals to acquire Virtus from BGH and CapVest,” the Virtus board said in a statement to the ASX.
“Until the bidding contest completes, there is no need for shareholders to take any action. There will be plenty of time for shareholders to decide which proposal they wish to accept and shareholders should wait for further advice from the Virtus board before making any decision.”
It comes after the Takeovers Panel rebuffed a complaint from BGH Capital that Virtus’s board “frustrated a proper action process” by not engaging with the firm. That followed the panel ruling in February that an exclusivity arrangement between Virtus and CapVest had an “anti-competitive effect”. “BGH submitted that, notwithstanding the clear intent of the orders, the circumstances were continuing to unacceptably frustrate a proper auction process or competitive bidding environment,” the Takeovers Panel said in a statement.
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