Morningstar | Corporate Action: We Recommend Healthscope Shareholders Vote in Favour of the Brookfield Scheme of A
We recommend shareholders of narrow-moat Healthscope vote in favor of the Brookfield Scheme of Arrangement at the scheme meeting on May 22, 2019. We also recommend electing for the all-cash option, rather than maintaining a shareholding in the unlisted entity, which is likely to be extremely difficult to sell. Brookfield’s original AUD 2.50 per share offer included the AUD 0.035 per share fully franked interim dividend, paid on March 26, meaning, the offer is now worth AUD 2.465 per share, above our stand-alone fair value estimate of AUD 2.40 per share. If the scheme is approved, shareholders will be paid on June 6, 2019.We recommend Healthscope shareholders consider selling on market at the current price of AUD 2.44 per share. Although the 1% discount to the offer price is material, considering payment will be received in a couple of months, we think the risk of holding the shares outweighs the benefits. If Brookfield fails to achieve the support of 75% of votes cast, the scheme will not proceed. If Brookfield also achieves the support of 50.1% of shares issued, it intends to launch a takeover offer for Healthscope; however, the takeover offer price will be only AUD 2.365 cash per share.
Under the takeover route, Brookfield’s offer will comprise: AUD 1.04 in cash, a 50% franked special dividend worth AUD 0.637, and a capital return worth AUD 0.688. However, for this to offer to proceed, shareholders must vote in favor of the capital return on May 22, 2019 and own their Healthscope shares on May 28, 2019. Although some shareholders will also generate taxation benefits under the takeover proposal, we don’t expect the combined value of these benefits and the offer price to materially exceed the current share price. We also think it’s unlikely that an alternative, and materially higher, takeover offer will emerge, considering BGH Capital was the only alternative bidder in recent months and refused to increase its offer above AUD 2.36 per share.
Healthscope is a private healthcare provider, with 45 private hospitals and 48 medical centres and skin clinics across Australia, as well as 56 international pathology laboratories. Co. is also a provider of pathology services in New Zealand, Singapore and Malaysia. Co.'s reportable segments are Hospitals Australia, which provides management and surgical and non-surgical private hospitals; Pathology New Zealand, which provides pathology services in New Zealand; and Other, which provides pathology services in Malaysia, Singapore and Vietnam and practice management services in medical centres in Australia.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.