Australian Unity rejects NorthWest bid for healthcare property fund

The battle for Australia’s biggest independent hospital property portfolio is heating up but the manager is holding firm

Picture: iStock.

Australian Unity’s specialist healthcare property fund has rejected a sweetened $2.5bn takeover bid from Canadian suitor NorthWest saying that it would not engage with the offshore group.

The fund is a prize as it is the last remaining large scale portfolio of hospital and healthcare assets in the Australian market that remains owned by local investors.

NorthWest, with the backing of Singapore‘s sovereign wealth fund GIC, has been stalking the trust, and has already gained a foothold by securing a 16 per cent interest from major shareholder Hume.

In a letter, the local fund manager said it had received strong feedback from Australian Unity Healthcare Property Trust unit holders in support of the decision by the board of its funds unit not to engage with NorthWest.

The board said an initial lower proposal was not in the best interests of unit holders, having regard to the value, conditionality and lack of certainty associated with it.

A fresh bid at an effective price of $2.35 per wholesale unit was an increase of about 7 per cent over the first bid. But this was also deemed not to be in the best interests of unit holders.

“The Board of AUFM believes that the revised proposal still significantly undervalues AUHPT, having regard to the current and expected future value of the portfolio and benefits it could deliver to a potential acquirer,” Australian Unity said.

Australian Unity has also engaged with counter-parties and other stakeholders associated with its hospitals and said feedback from them supported the view that, given the uncertainty inherent in NorthWest’s further engagement could introduce “significant risk” to ongoing commercial and operational relationships.

Australian Unity said it was separately considering a range of options to further enhance unit holder value.

The manager said it was “no surprise” the fund had attracted the attention of potential acquirers wanting to increase their exposure to Australia’s highly sought after and scarce hospitals and associated healthcare real estate.

NorthWest is expected to formally write to fund members.

The suitor has indicated it is willing to further bump up its bid if additional value can be demonstrated through due diligence, particularly in the development pipeline which Australian Unity has said is worth more than $1bn.

“It is not clear to us how Australian Unity can continue to justify not engaging with NorthWest and denying unit holders the opportunity to consider our offer and the potential for a further price increase,” NorthWest said.

The suitor has criticised the healthcare property trust’s board composition, which has no independent directors, as creating a conflict of interest between the directors acting in the best interests of unit holders and Australian Unity’s own interests as manager.