Pathology wars: ACL accuses Healius of misleading shareholders as hostile takeover battle heats up

Australian Clinical Labs has issued its second supplementary bidders statement in a desperate attempt to woo Healius’s smaller shareholders, which own 79 per cent of the company.

Australian Clinical Labs has attacked the board of its takeover target Healius, branding its statement to shareholders advising against the deal as “fundamentally flawed”, “inaccurate” and “misleading”.

ACL has been relatively silent for the past two-and-a-half weeks since Healius’s board led by Jenny Macdonald formally rejected the takeover bid, saying ACL’s overtures were “plainly inadequate”.

Ms Macdonald questioned the $95m in cost savings that ACL promised shareholders it could deliver from a merged group, and said ACL’s nil-premium offer had slid to an “implied discount”. Crucially, she said, Healius shareholders were being asked to surrender control of the company without a premium.

Ms Macdonald’s comments followed Healius’ two biggest shareholders Perpetual and Tanarra – which own 21 per cent of the company – labelling the bid as “unattractive”. Healius has also not engaged an independent expert to access the bid after it failed to gain major shareholder support.

But on Monday, ACL issued a second supplementary bidder’s statement in a desperate bid to woo smaller shareholders, who collectively own about 79 per cent of Healius.

ACL accused Healius’s board of “failing shareholders” and “not acting in their best interests”.

“Healius’s target’s statement is fundamentally flawed. The proposed merger represents the most value accretive option available to Healius shareholders,” ACL said, citing Healius’s rejection of engaging an independent expert to assess the bid.

Healius chair Jenny Macdonald says ACL’s nil premium bid is “plainly inadequate”.

ACL said the synergies it expected to deliver from a combined group were close to the $80m that Healius estimated in 2020 when it was considering a merger with ACL.

ACL said that Healius’s board had also declined an offer to meet and discuss the rationale behind the forecast cost savings.

“Healius has failed to engage in any substantive or considered way with the expected cost synergies, despite undertaking work itself collaboratively with ACL in FY20 which estimated a synergy opportunity of over $80m that could be achieved within three years from a potential merger with ACL,” ACL said.

ACL, which has a market value of $717m compared with Healius’s $1.77bn, also said a control premium was not necessary, given that ACL shareholders would not control a merged group.

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.

“The composition of the Merged Group’s board will be decided by the merged group shareholders, of which Existing Healius Shareholders will comprise 68 per cent. Healius’ claim that ACL intends to exert control over the Merged Group’s board is inaccurate and misleading.

“Existing ACL Shareholders will hold a minority position in the merged group. Typically, shareholders holding a minority position – not those holding a majority – receive a premium.

“Healius shareholders that accept the offer will not give up the opportunity to receive a control premium in the future in respect of the merged group.”

ACL also highlighted Healius securing a waiver from its lenders to increase its gearing ratio covenant from 3.5x to 4.0x in FY23 and the first half of next financial year as further evidence that ACL’s bid represented the “most value accretive option available”.

Maxine Jaquet, Healius chief executive.

This is despite ACL’s proposal being conditional on Healius not seeking waivers from its lenders.

“Healius is likely to be cash flow negative for 2H23 excluding proceeds of the day hospitals sale; and Healius intends to continue its ongoing practice of significant EBIT normalisations in 2H23, which ACL believes will considerably inflate Healius’ adjusted “underlying” figures, relative to its statutory performance,” ACL said.

“Healius has consistently undertaken this practice over multiple years such that it no longer represents a one-off event.”

Healius reaped $127m from the sale of Montserrat Day Hospitals to Nexus Hospitals – a deal that was announced last December. It also confirmed that it would meet analyst consensus estimates on full-year earnings.

“While Healius has not provided FY23 guidance, it continues to monitor FY23 analyst consensus. Assuming a continuation of current trading conditions for the remainder of FY23, Healius confirms that it does not expect FY23 underlying EBIT to differ materially from FY23 underlying EBIT analyst consensus,” the company said earlier this month.

Healius chief executive Maxine Jaquet added: “The successful sale of Montserrat has been achieved at an attractive valuation for Healius. It is an important step in providing additional focus on growing the core pathology and imaging services”.