Takeovers Panel rebuffs BGH Capital’s complaint in Virtus Health takeover battle

In a stinging rebuke, the Takeovers Panel has rejected BGH’s complaint against Virtus and its preferred bidder CapVest.

The Takeovers Panel has rejected BGH’s complaint against Virtus and its preferred bidder CapVest. Picture: Virtus Health

The Takeovers Panel has rebuffed a complaint from BGH Capital that the board of Australia’s biggest IVF provider Virtus Health snubbed the firm’s $655m takeover offer and “frustrated a proper action process”.

The group said on Thursday it would not take action against Virtus and its preferred suitor, London-based CapVest, declaring that it was “unlikely that it would second guess the Virtus board’s decision”.

Virtus’s board said it would not engage with BGH over its revised offer of $7.65 last month after CapVest lobbed a “superior” offer of $7.80 a day later.

BGH complained to Takeovers Panel that the snub was anti-competitive. It highlighted a ruling the panel made two weeks ago 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.

“It submitted that this was evidenced by Virtus disclosing the Revised BGH Proposal to CapVest (either via ASX announcement or privately), CapVest matching or improving its existing proposal and the Virtus board then dismissing the revised BGH proposal in preference to continuing to deal exclusively with CapVest, despite having the legal ability, as a result of the orders, to engage with both parties in parallel.”

But the Takeovers Panel said in regard to the revised offer, the Virtus board acted in the interest of the company and its shareholders.

“The panel considered that the amended process deed enabled Virtus to engage with BGH in relation to the revised BGH proposal, but the Virtus board decided not to do so on the basis that that decision was in the best interests of Virtus and its shareholders.

“If it conducted proceedings, the Panel considered it unlikely that it would second guess the Virtus board’s decision. The Panel concluded there was no reasonable prospect that it would make a declaration of unacceptable circumstances. Accordingly, the Panel declined to conduct proceedings.”

BGH sought to edge out the British private equity firm, declaring that it would use its 20 per cent holding in Virtus to block any CapVest offer.

But CapVest has a plan B: an off-market takeover as an alternative, which would need only 50.1 per cent acceptance from Virtus shareholders at the lower price of $7.70 a share.

Like BGH’s revised bid, CapVest’s latest offer does not include the 12c-a-share dividend that Virtus declared last month.

Virtus’s net profit fell 49.5 per cent to $15.13m in the six months to December 31. Revenue was flat at $171.3m as the company reeled from Covid-19 restrictions.

Virtus chief executive Kate Munnings said that, despite the lifting of suspensions on fertility treatments, restrictions imposed in late December and early January were likely to hit second-half earnings, given “deferrals and cancellations that may not all be caught up within” the period.

BGH has had a long-term interest in health, vying for Healthscope in 2019. It lost to Canadian investment manager Brookfield, which bought Australia’s second-biggest private hospital operator for $4.4bn in June that year.