Healthscope tipped to shut small hospitals, fearing Labor shake-up

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The country’s second largest private hospital operator, Healthscope, is tipped to be shutting smaller hospitals as it braces itself for tougher times under a Labor government.

All eyes are on the company tomorrow when Healthscope holds its annual general meeting and chairwoman Paula Dwyer faces a backlash from shareholders.

The hope by some is that the board will recommend a takeover bid for the company by private equity firm BGH Capital and existing investor Australian Super.

With respect to closures, it is understood that Healthscope is planning to relocate Ringwood Private Hospital and Bellbird Private Hospital in Victoria into the Knox Private Hospital Campus.

The move is one thought to be designed to boost profitability and could be perceived as an attempt by the company to get on the front foot and implement a number of changes that would likely happen should the business fall into private equity hands.

BGH and its backers put forward a bid for Healthscope this month of $4.1 billion — the same price they offered several months ago but now at a higher premium due to Healthscope’s lagging share price.

Healthscope, advised by UBS, appears to be juggling a number of matters on various fronts as it fights off the private equity suitor.

It is working on a partial sale process of its real estate portfolio, opening the new Northern Beaches Hospital in Sydney this week, apparently closing hospitals and expanding The Sydney Clinic, which is Healthscope’s mental health hospital based in Bronte.

Healthscope is said to be holding board meetings all week and is yet to offer a view on the bid by BGH Capital.

The understanding is that the board is split on its views and many shareholders are eager for the board to allow the suitor to conduct due diligence.

BGH has also bid for Perth-based educator Navitas and in that situation the board has not gone as far as rejecting the offer, but has said that it saw the bid as one that “does not reflect the value implied by management’s strategy and plan”.

But it has left the door open for talks to continue.

It is an approach to the offer that the Healthscope board may also take.

Australian private hospital operators are facing headwinds with the expectation that Labor will be elected at the next federal election in May, introducing its promise to cap health insurance increases by 2 per cent.

Healthscope shares closed below the $2.36 per share bid price at $2.10.