ACL-Healius merger still looks a long shot

ACL argues that a tie-up with Healius would create $95m of synergy benefits.

The appointment by Healius last month of former Australian Clinical Labs director Michael Stanford raised hopes among some around the market that a merger between the groups looked more promising.

Mr Stanford was previously on the board of ACL, which has been lobbying Healius to accept a hostile reverse takeover proposal, creating a $2.2bn-plus company.

The proposal earlier this year involved Healius shareholders being offered 0.74 ACL shares for each Healius share, equating to Healius and ACL shareholders owning 68 and 32 per cent respectively of the new entity.

But the bid has already been rebuffed by the two largest Healius investors, Perpetual and Tannara, with a combined holding of about 20 per cent.

Mr Stanford, a former chief executive of St John of God Health Care, had already left the ACL board before joining Healius and one thought was perhaps it could suggest Healius was looking at turning around the situation and launching a bid for ACL itself.

But those close to Healius say that the company’s view historically has been that a merger does not make sense regardless of which way around it was to unfold.

So far, it appears a sure bet that the Australian Competition and Consumer Commission will reject a tie-up when it delivers a ruling in October, arguing it would create too much concentration in the pathology market, particularly in Victoria, as the country’s largest pathology provider with more than 50 per cent of the country’s national collection centres.

ACL is the country’s third largest pathology provider while Healius is in second place.

Even if a deal was possible, it would likely require a large number of asset sales to get approval.

Mr Stanford is highly regarded for his experience, and would be valued by the Healius board when he starts on September 1.

As it stands, the current metrics of the deal do not make sense based on share price movements, say market observers, where the Healius share price has rallied and the ACL price has fallen.

ACL has argued that a tie-up would create $95m of synergy benefits.

Healius will announce its full year results on August 30.

When ACL made its offer in March, its shares were trading at about $3.70, while the share price of Healius has remained flat.

ACL’s shares on Thursday closed at $3.19, down 2c, while Healius closed at $2.91, up 3c.

Private equity firm Crescent Capital listed ACL in 2021, selling shares at $4 each, with its market value at $809.3m. It holds 30.1 per cent. It is a roll-up of various businesses purchased by Crescent, including operations from Healthscope and St John of God.