Takeovers Panel satisfied with ACL’s hostile play for Healius after late-Friday reissue of bidders statement

The Takeovers Panel is satisfied with ACL’s bid for Healius, despite Healius’s complaints of a ‘laundry list’ of ‘overly restrictive’ conditions.

The Takeovers Panel has dealt a blow to Healius, with the pathology group losing its bid to fend off a hostile acquisition from smaller rival Australian Clinical Labs and its “laundry list” of “overly restrictive” conditions.

The panel on Monday said there was “no reasonable prospect that it would make a declaration of unacceptable circumstances” and declined Healius’s request to launch proceedings into one of the year’s biggest deals.

The panel – compromising Timothy Longstaff, Denise McComish and Rory Moriarty – is yet to publish the full reasons behind its decision.

It follows Healius’s biggest shareholders – Perpetual Capital Management and Tanarra Capital, which together hold about 21 per cent of the company – condemning the deal as “unattractive”.

ACL lobbed a reverse takeover of Healius, which has a market value of $1.84bn – more than double that of ACL’s $719m – last month. ACL told investors that it was better placed to manage Healius than its current leadership – and such was its confidence that has offered a nil-premium bid.

It has fuelled what is shaping to be an ugly battle – with ACL branding comments made by Tanarra’s chief executive, Melbourne powerbroker John Wylie, about its accounting practices as misleading.

Despite the Takeovers Panel declining Healius’s request to launch proceedings, it did have some concerns about the deal, namely that ACL wouldn’t be able to deliver the estimated $95m in cost savings that it told Healius investors that it could deliver from merging Australia’s second and third-biggest pathology companies, given the deal’s 90 per cent acceptance condition.

John Wylie said ACL’s nil-premium offer to take over Healius is ‘unattractive’.

Without Perpetual and Tanarra’s support, it was highly unlikely that ACL could complete a merger and deliver the cost savings that it continued to tout

But in a desperate effort to resuscitate the deal and satisfy the Takeover’s Panel, ACL distributed a replacement bidders statement (RBS) late on Friday, saying it could still deliver its promised cost savings – even if it acquired 50-90 per cent of Healius’s shares.

“The panel had concerns in relation to disclosure in the RBS regarding the impact of ACL acquiring less than 90 per cent of Healius shares on certain expected cost synergies set out in the RBS, and requested further disclosure,” the panel said in a statement.

“ACL subsequently provided revised disclosure in the RBS in relation to this aspect. The Panel was satisfied its concerns were sufficiently addressed in the RBS (as amended) and considered that other requests made by Healius could be addressed in the target’s statement.”

Healius complained to the Takeovers Panel, saying that the conditions included in the ACL bid were such that it would be unable to adhere to them without detriment to running its business competitively and efficiently.

Mr Wylie said late last month that many of ACL’s conditions leave little room for adverse developments, while a potential six-month approval wait time from the Australian Competition and Consumer Commission will leave Healius hamstrung.

“They (the conditions) have been imposed by ACL knowing that, by its offer, it has placed Healius in a position where it faces an extended period of business uncertainty due to ACL’s need to obtain ACCC approval, a process that will take many months.

“This means Healius shareholders have little idea of what the real value of the ACL offer may be ultimately, if it ever becomes capable of acceptance.

“Other conditions attempt to restrict the continued effective operation of Healius’ business during the, likely prolonged, offer period, such as restrictions on hiring and retaining staff.”

Mr Wylie also criticised ACL for offering no takeover premium – despite stating that it wants to seize management control of the merged group and “in all likely board control”.

Healius told ACL that it “remains focused on running its business in the ordinary course and in a manner that preserves the goodwill of its business and its ability to compete vigorously in its markets, rather than trying to religiously adhere to a laundry list of conditions, many of which are not commercially critical to the offer and are otherwise overly restrictive”.

In the replacement bidders statement – which ACL said it would begin distributing to shareholders in late April – it defended its nil-premium offer and also its accounting practices – which Mr Wylie said “flattered” its headline earnings before interest and tax margin and cast doubt on ACL’s claim that it was better placed to manage Healius.

In a statement to the ASX, ACL said it was concerned comments about its accounting practices were “misleading”.

“ACL has included additional disclosure on the historical margin outperformance of ACL relative to Healius that shows that ACL’s margin outperformance is not materially impacted by the different approaches to AASB 16 lease accounting adopted by ACL and Healius, as evidenced by ACL’s comparable EBIT margin outperformance on pre AASB 16 and post AASB 16 bases,” ACL said.

“ACL has provided further disclosure on the basis for its statement that the proposed merger is expected to deliver a reduced carbon footprint and removed the statement that ACL believes that it can lift the safety standards of both Healius’ patients and staff. In accordance with these changes, ACL has changed references to ESG benefits within the replacement bidder’s statement to environmental benefits.”

Healius shares closed down 1.9 per cent at $3.07 each, while Australian Clinical Labs fell 1.1 per cent to $3.49.