Healthscope blinks on Brookfield bid but BGH has time to weigh its options

BGH Capital has time to weigh its options after Healthscope’s board agreed to back Brookfield’s rival $5.7bn bid.

Healthscope Chairman Paula Dwyer at the company AGM in Melbourne. David Geraghty/The Australian

Healthscope chair Paula Dwyer has blinked, allowing Brookfield to cut its proposed bid for the company by over 3 per cent, to $2.50 a share.

Rival BGH now has to consider its stance after flagging a potential rival bid, but one starting at a much lower price of $2.36 a share.

The $5.7 billion bid is at an historical earnings to enterprise value multiple of 14.7 times and comes off the back of a profit upgrade from Healthscope.

Healthscope chief Gordon Ballantyne said earnings before interest tax, depreciation and amortisation would increase by 7.7 per cent to $198.1 million on a 3 per cent increase in revenue to $1.2bn.

He also said after initial problems, its flagship Northern Beaches hospital in Sydney was running well.

BGH and AustralianSuper control just under 20 per cent of Healthscope and so can kill the proposed scheme of arrangement on their own, which would mean a lower bid price of $2.40 a share.

This is a big call for the 15 per cent shareholder AustralianSuper given the controversy over its joint bid for the hospital company.

AustralianSuper has been flooded with new funds in the wake of the scandals surrounding the bank-owned funds and is now arguably too big for the Australian stockmarket. It wants to take more direct stakes in Australian companies.

This explains its moves to join with BGH in bidding for Navitas and Healthscope.

Bid documents will be released in late April, with a scheme meeting due in late May.

This gives the BGH bidding team plenty of time to consider its next move.

Brookfield has its foot in the door, but BGH is still keen, so it;s too early yet to call this game over.

Healththscope chair Dwyer has taken a big risk in allowing Brookfield to drop its intended bid price after first forcing it to raise the offer to get into the due diligence room.

Given the only public news on the company since them has been positive, there is no known reasons why it would agree to a lower bid.