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The $1.58 billion off-market takeover bid for pathology company Healius (ASX: HLS) has been put on hold by Australian Clinical Labs (ASX: ACL) pending a decision by the competition watchdog and a review of the target’s FY23 financial statements after noting that breaches to conditions for the offer may have occurred.
ACL has postponed an upcoming extraordinary general meeting of shareholders to decide on the buyout as the hostile battle between two of Australia’s largest pathology service providers looks set to go down to the wire.
ACL launched the off-market bid to acquire Helius in March, a move that would see the merged entity own more than 50 per cent of approved collection centres across Australia.
While ACL says that the proposed merger remains ‘the most value accretive option for Healius shareholders and ACL shareholders', the preliminary FY23 financial figures by Helius indicate that some conditions for the merger have not been met.
Healius noted in its target statement released to the market on 5 September that its underlying EBIT for FY23 is likely to be less than specified by ACL in its takeover offer.
In its preliminary FY23 report, Healius reveals underlying EBIT for FY23 is $99.0 million and reported EBIT is a loss of $335 million, while a loss for the year from continuing operations for the group in FY23 is $380 million.
“While underlying EBIT was in line with consensus, these amounts are all less than the target amounts arbitrarily specified by ACL of $99.7 million for underlying EBIT, $46.1 million for reported EBIT and a loss for the year from continuing operations of $2.1 million,” Healius said in its target statement.
In an announcement to the ASX this morning, ACL says it is considering this information and its implications for the offer.
“ACL reserves its right to rely on any breaches of the conditions that have occurred or may occur as a result of the matters disclosed by Healius in the supplementary target’s statement, and its right to waive any such breaches. ACL expects to provide an update at the appropriate time following,” the company says.
This has triggered ACL’s decision to postpone the planned EGM of its shareholders scheduled for 19 September until 7 November where the merger will go to a vote.
The company says this delay will give it time to review the Healius FY23 financial statements and annual report, which ACL expects Healius to release to the ASX on or before 30 September 2023.
ACL is also waiting on a ruling by the ACCC on whether it deems a merger to lessen competition in the pathology services sector. In July, the ACCC aired 'strong concerns' over the proposed merger.
“The decision to postpone the ACL EGM has been made by the ACL board in light of the fact that the ACCC has indicated that it expects to announce its final decision in respect of the proposed merger on 12 October 2023,” the company says.
As a result, ACL has extended the offer period to Friday, 17 November 2023.
The battle for control of Healius has led to a war of words between the two companies, with Healius arguing in March that the conditions of the offer were 'overly restrictive and burdensome' as it rejected the offer. ACL described the board's unanimous rejection of the deal as 'fundamentally flawed'.
In today’s statement to the ASX, ACL says it has been granted relief by the Australian Securities and Investments Commission from its requirements to send takeover documents to Healius securityholders by post.
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