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Acurity independent directors back bonus issue in Connor takeover

Friday 14th November 2014

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Acurity Health Group's independent directors have backed a two for 11 fully imputed taxable bonus share issue as part of a takeover bid by Connor Healthcare, which wants to buy the 29 percent of the hospital operator it doesn't own.

Acurity's committee of independent directors recommended the board approve the issue requested by Connor, which would cost the company almost $2 million in withholding tax on behalf of shareholders, Acurity said in a statement. The bonus issue was struck by Connor and Acurity shareholder AMP Capital to get access to the company's imputation credits in return for its 5.6 percent stake.

The effect of the deal will mean Connor, which is made up of Acurity's three biggest shareholders and currently has acceptances of 84.4 percent, will cut its price per share to $6.13 from the $7.25 offer, but won't affect the total consideration paid to investors.

"The committee believes that the bonus issue should not adversely affect shareholders who have correctly declared their tax status, provided that Acurity pays applicable resident withholding tax or non-resident withholding tax on behalf of shareholders," the company said. "Accordingly, the committee has recommended to the full board that it approve the fully imputed bonus issue requested by Connor, conditional on Connor's offer being declared unconditional in all respects."

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."

Connor 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.

The shares rose 2.9 percent to $7.15 today.

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