Shareholders increase pressure on Healthscope board to engage in $4bn bid

The pressure on the Healthscope board to give suitor BGH Capital access to its dataroom is intensifying.

The Healthscope headquarters in Melbourne, Australia. Picture: Bloomberg

The pressure on the Healthscope board to give suitor BGH Capital access to its dataroom is intensifying with investors increasingly pushing for a sale process to play out.

Brad Potter, head of Australian equities at Nikko Asset Management, has added his voice to calls for the board to allow due diligence ahead of directors facing shareholders at its annual general meeting tomorrow, where it is tipped to come under a series of questions on the $4.1 billion bid by a BGH Capital-led consortium.

Mr Potter has backed calls from 9.86 per cent Healthscope investor Ellerston Capital to allow BGH to conduct due diligence on the private hospital group.

But Mr Potter said he wanted the dataroom opened not just for BGH but to any potential bidders.

“I think it is in the best interests of all shareholders to let this play out and see what transpires, notwithstanding it can be distracting for management but I think the board should be acting in the best interests of shareholders,” he said.

Nikko was once Healthscope’s third largest shareholder with just over 5 per cent of the stock but it divested the bulk of its shares in May but it still maintains a holding.

Healthscope was in the sights of rival private equity funds earlier this year after the BGH Capital-led consortium bid was followed by Canadian group Brookfield committing to a $2.50 bid.

The Healthscope board, led by Paula Dwyer, declined to engage with either private equity offer and instead decided to establish an unlisted property trust, with the company owning a majority interest and a co-investor taking a stake of up to 49 per cent.

Mr Potter said he understood why the company did not allow access to the dataroom to the two competing bids, given the conditions both offers included. But he said, following BGH renewing its bid last week, it was worthwhile seeing what transpired by opening the dataroom.

“We are long term value investors and we can see the value of Healthscope from a three plus year perspective, which is why we bought into the stock,” he said.

“Some of the macro issues related to the hospital sector as a whole we think are short term in nature. In the long term with an ageing population, private hospitals will have to make up a reasonable proportion of the healthcare needs of Australia. They are good companies from that perspective.”

Mr Potter added that he did not back the property spin off plan, saying that he did not think it added a lot of value.

Ellerston had also indicated that it supported the $2.36-a-share offer price, subject to a superior proposal but Mr Potter would not comment on the price.

“We are happy to let it play and then we will make a considered decision once we have all the facts,” he said.

The consortium, which includes Healthscope’s largest shareholder AustralianSuper, today bumped up its interest in the target to 18.31 per cent after completing an equity swap over 2.71 per cent of shares in Healthscope.

Healthscope also lodged with the Australian market today a letter from Ellerston Capital stating its wish for the board to allow the consortium access to due diligence.

The fund manger said in a letter to Ms Dwyer that its support of allowing the BGH-AustralianSuper consortium access to due diligence, and also supporting the offer price subject to a superior proposal, was valid until June 30, 2019.