BGH threatens to derail CapVest’s bid for IVF provider Virtus, says Deloitte

Virtus’s chair Sonia Petering is urging all shareholders to cast their votes in scheme meeting on CapVest’s takeover offer for the group.

BGH’s 20 per cent holding in Virtus risks a takeover from CapVest proceeding. photo credit: Virtus Health

Deloitte has warned Virtus investors that there is a risk a takeover offer from London-based CapVest may not proceed, as rival suitor BGH says it will use its 20 per cent holding to block the deal.

In its independent expert’s report into CapVest’s takeover offer, Deloitte said it was fair and reasonable but investors need to be mindful of BGH’s voting intentions.

BGH has offered $8 cash a share, or $684m, to take over the group — which Virtus’ board has strongly urged investors to reject — compared with CapVest’s offer $8.15 or $8.10 per share depending on whether or not a scheme of arrangement is approved.

“Given the shareholding of BGH, and based on precedents, there is a significant risk the proposed CapVest scheme will not be approved. If this is the case, shareholders will not be able to realise the benefit of the higher consideration under the proposed CapVest scheme,” Deloitte said.

“However, at that point, shareholders will still have the opportunity to sell their shares into the proposed CapVest takeover, subject to the 50.1 per cent minimum acceptance condition.

“Since BGH is unlikely to accept the proposed CapVest takeover, this means that other shareholders owning more than 60 per cent of the remaining shares not owned by BGH would need to accept the proposed CapVest takeover unless CapVest waives this minimum acceptance condition. This risk that the minimum acceptance condition is not satisfied or CapVest does not waive this condition should be considered.”

Deloitte — which valued Virtus between $7.31 and $8.27 a share — also believed that the likelihood of an alternative superior offer emerging was low, and said there was “certainty” in BGH’s all cash offer.

“The proposed CapVest scheme and the proposed CapVest takeover represent an opportunity for Shareholders to realise their investment in Virtus without incurring any transaction costs. This is also the case with the proposed BGH takeover.

“However, there are no notable conditions to the proposed BGH Takeover whereas the proposed CapVest Scheme and proposed CapVest takeover have notable conditions.”

Virtus chair Sonia Petering urged all shareholders to cast their votes at the scheme meeting on June 6.

“To the extent that BGH continues to own or control 20.02 per cent of Virtus shares on the date of the scheme meeting, at least 20.02 per cent of Virtus Shares is expected to be voted against the scheme,” she said.

“Given the 75 per cent voting threshold noted above applies in respect of votes cast at the scheme meeting, it is important for as many Virtus shareholders as possible who support the scheme to cast a vote in its favour, either by proxy — including by corporate representative — or in person.

“As noted above, BGH is a rival underbidder that is seeking to secure control of Virtus. You should not assume that its interests in opposing the scheme aligns with the interests of other Virtus shareholders”.