Rival bid for Healius on the cards

Australian Clinical Labs is the nation’s third largest supplier of pathology services.

Morgan Stanley Infrastructure Partners is believed to be weighing a rival offer for the $1.8bn healthcare provider Healius after the group’s major shareholders have refused to support a merger proposal from its rival.

Healius told shareholders on Monday to take no action over a nil-premium merger offer from Australian Clinical Labs that comes with 25 conditions including 90 per cent shareholder approval.

ACL, which is the country’s third largest provider of pathology services, counts private equity firm Crescent Capital as its major shareholder after it listed the business, and while the deal would provide the private equity firm with an exit, Healius claims that the offer is a discount to the its value, based on its performance over time.

Major shareholders Tanarra Capital and Perpetual are against the ACL offer, and they collectively hold 21 per cent of the company.

However, it is now understood that Morgan Stanley Infrastructure, and potentially others, are considering whether to put forward a buyout proposal.

Late last year, private equity firm EQT and infrastructure groups Omers and IFM were understood to be looking at Healius, the country’s second largest pathology provider and diagnostic imaging services.

Yet whether they move forward with a proposal is yet to be seen, with some suggesting that Healius would not have the characteristics that appeal to infrastructure buyers and that getting doctors on board for such deals is always a challenge.

The ACL offer proposed a deal that created a $2.4bn-plus company with ACL owning 32 per cent and came with $95m in cost synergies.

Yet getting the deal past the Australian Competition and Consumer Commission could be seen as a challenge.

Crescent listed ACL in 2021, selling shares at $4 each with its market value at $809.3m and holds 30.1 per cent.

For the six months to December, Healius reported a $28.7m loss while ACL reported a $25.4m net profit, although down 80.5 per cent from the previous corresponding period.

Pathology earnings have fallen since the height of the Covid-19 pandemic, when pathology services were in strong demand.

Healthcare companies are now suffering from staffing shortages, which are driving costs higher.

Healius, a perennial takeover target, has Perpetual owning 12.4 per cent, the Australian Retirement Trust 8.6 per cent and Tanarra Investments with
8 per cent.

China’s Jangho offered $1.8bn for Healius in 2019, but was rejected, while Partners Group offered $2.1bn in 2020 but was also rebuffed.