Connor to buy AMP Capital's Acurity stake after agreeing to issue of taxable shares
Connor Healthcare, which is aiming to buy the 29 percent of Acurity Health Group it doesn't already own, has gained agreement from AMP Capital to sell into the offer, provided Acurity first makes a two-for-11 issue of taxable bonus shares.
AMP Capital, a Wellington-based fund manager, has agreed to sell its 5.6 percent to Connor on the condition it can get access to Acurity's imputation credits, which would be attached to the bonus shares. Effectively AMP Capital's holding in the the hospital operator would rise to about 1.1 million shares from 965,376, while the per-share price would reduce to $6.13 from $7.25.
Connor's holding would rise to 86.33 percent, closer to the 90 percent threshold that allows it to mop up the rest. Connor boosted its offer in August to $7.25 per share after Acurity's shares rose above its initial offer price of $6.50. The shares were unchanged at $6.95 and have gained 28 percent since the start of the year.
Connor, which is made up of Acurity's three largest shareholders, is owned by Sydney-based Evolution Healthcare, which took an 11 percent stake in Acurity last year at $5.50 a share and also owns Boulcott hospital in Hutt City. It has a takeover implementation deed with Acurity's majority shareholder, Austron, under which Austron will become the 75 percent shareholder and Evolution the 25 percent shareholder in Connor if the offer is successful.
The cost of upgrading Acurity's flagship Wellington hospital to earthquake code has been flagged by Connor as too onerous for a public company, saying it is better placed to absorb the cost. A recent review suggested the upgrade would cost between $45 million and $50 million, with a further $10 million needed to replace the current Wakefield Medical Consultant Centre.
Acurity's independent directors have accepted the offer in the absence of any higher bid, saying it is unlikely a better offer will emerge and the share price is unlikely to stay at these levels. In its target company statement, the independent directors note that Acurity has "excellent medium to long term prospects" but flag "significant short to medium term challenges, including the substantial capital expenditure required at Wakefield Hospital."
Last week the takeover hit a bump, when the Commerce Commission extended its deadline to approve or dismiss the deal a week past Connor's own takeover deadline. The commission is reviewing whether the takeover would see reduced competition between other hospital operators, including Southern Cross Health, through its affiliated provider scheme and the government's Accident Compensation Corp, which runs the country's public hospitals.
Should Connor reach the 90 percent mop up threshold it will have 30 days after the Commission's ruling to satisfy the regulator's conditions. The Overseas Investment Office has already approved the deal.
