Anxious wait for Vital investors over A$81m Healthscope investment

Monday 24th December 2018

Investors in Vital Healthcare Property Trust have an anxious wait to get a clearer view of whether they can recoup the A$81 million the trust’s manager has forced them to invest in ASX-listed Healthscope.

Healthscope on Friday said it has given property giant Brookfield Capital Partners until Jan. 18 to come up with a firm offer.

Vital's manager, Canada-based NorthWest Healthcare Real Estate Investment Trust, acquired a stake in Healthscope in May. It wanted to position itself and Vital for any potential property assets that could become available after a BGH Capital-led consortium kicked off a takeover tussle for the Melbourne-based private hospital operator.

Brookfield, which came in over the top, had until last week to complete due diligence intended to confirm either a A$2.585 per share offer for Healthscope via a scheme of arrangement or a takeover offer priced at A$2.455 per share.

Despite Healthscope’s comment that Brookfield has confirmed “it has no reason to believe it would not be willing and able to proceed,” one ominous sign is that any such offer is conditional on Brookfield arranging debt financing.

That’s because global equity markets are tanking and the US high-yield bond market – the junk bonds private equity firms such as Brookfield have become accustomed to using to raise funds – has apparently seized up.

A number of deals internationally have already been cancelled as a result.

Healthscope covered its bets by warning shareholders that there is "no certainty" a scheme of arrangement or takeover bid from Brookfield will result.

After the statement about Brookfield, the BGH-AustralianSuper consortium, said it is able to commence due diligence immediately on its also non-binding offer to acquire Healthscope for A$2.36 per share.

That’s precisely the amount NorthWest has agreed to pay for its effective 13.4 percent stake in Healthscope.

NorthWest borrowed A$81 million from Vital for the bid, a fact that was a bone of contention at Vital’s acrimonious AGM last Thursday.

The independent chair of Vital’s manager, Claire Higgins – whom NorthWest can fire at will – told the meeting that “Vital and the NorthWest REIT agreed to pursue this opportunity equally.”

The only problem is that Vital, being a trust, can agree to nothing and is effectively at NorthWest’s mercy in this situation.

It appears Healthscope’s shareholders had all but given up on Brookfield. The shares had fallen as low as A$2.02 earlier this month but have perked up on Friday to as much as A$2.20 and closed the session at A$2.18, indicating continuing concern about whether Brookfield will be able to clinch the deal.

(BusinessDesk)

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