Australian Unity signals fightback against Canadian raider NorthWest

Australian Unity will fight to keep its healthcare property fund as it rejected a sweetened bid from Canadian suitor NorthWest.

The fierce contest for the Australian Unity Healthcare Property Trust shows the depth of demand for hospitals and medical centres.

Australian Unity will fight to keep its healthcare property fund as it rejected a sweetened bid from Canadian suitor NorthWest and flagged objections to the aggressive $2.7 billion takeover move on the wholesale trust.

The fierce contest for the Australian Unity Healthcare Property Trust shows the depth of demand for hospitals and medical centres and also the rising interest of real estate groups and private equity players in the hot sector.

Big name rivals including KKR, Dexus and Charter Hall have been mooted as potential partners for Australian Unity as it seeks to ward off NorthWest, which has already built up a network of Australian hospitals.

Australian Unity said it had concerns about the information provided by NorthWest to investors and warned them not to take action on the bid.

Australian Unity executive general manager Mark Pratt said the group’s 10,000 mainly small investors preferred the long-term income from owning units in the health-focused vehicle.

He also pointed to the fund’s $1 billion development pipeline and the opportunities the manager had created for investors. Mr Pratt also noted the demand for healthcare assets that was driving up values, especially for the kind of long-leased assets that the fund owns.

“We still see there being material momentum in asset values to come,” he said.

Mr Pratt said a meeting called by NorthWest to decide the fate of the fund on July 1 was unusual as normally this was done by the manager, and subject to review by the regulator and courts.

Australian Unity held “real concerns” about the move which he claimed sought to circumvent important protections for retail investors.

“If a meeting goes ahead it is crucial that retail investors have appropriate information to enable them to make a decision,” he said.

While NorthWest has called the meeting, which will be overseen by former ASIC chair Alan Cameron, Mr Pratt pointed to the fund’s strong performance, including a one-year total return of just over 25 per cent and a longer-term record of close to 15 per cent.

Australian Unity executive general manager Mark Pratt. Picture: Aaron Francis

Australia Unity formally rejected NorthWest’s third proposal on the basis it undervalues the healthcare property trust. The manager said material sent by NorthWest was not supported, recommended or endorsed by the board.

Australian Unity refused to discuss talks with other managers that could act as white knights but said the fund board “continues to consider various options to further enhance unitholder value”.

NorthWest has been undeterred by the rejection from Australian Unity and is keen to push ahead with the meeting.

The company said it believed that all AUHPT unitholders should have the opportunity “to consider and vote on our cash offer, which is at a significant premium to the undisturbed unit price and a material 16 per cent premium to the current price”.

“Due to AUFM’s repeated refusal to engage with us, the only way to achieve that was for us to call a unitholders’ meeting,” NorthWest said.

It said “on a number of occasions” it had requested a process for an independent review of its offer be established given Australian Unity’s conflicted role as trust manager.

“Again, Australian Unity Funds Management’s refusal has prompted us to commission our own independent expert’s report by Grant Thornton, which found the offer price is above the top end of the independent expert’s assessed value range for AUHPT,“ NorthWest said. It said these findings “make it hard to reconcile” Australian Unity’s claim that ”our proposal continues to materially undervalue AUHPT”.