BGH continues fight for Australia's Virtus Health
BGH Capital is refusing to give up its pursuit of Australian fertility care business Virtus Health, tabling a revised buyout bid even after the company entered a binding agreement with CapVest Partners.
The private equity firm - which already owns 19.99% of Virtus, giving it scope to block certain competing proposals – has made an off-market takeover offer of AUD 8.00 per share, according to a filing. The offer represents a 57% premium to the dividend-adjusted closing price on December 13, 2021, when BGH made its initial approach, and values Virtus at AUD 683.5bn (USD 518m).
The Virtus board said it has now received seven competing proposals from BGH and CapVest. It will consider the latest BGH offer, given the agreement with CapVest allows the company to entertain a “superior proposal” if one emerges. Virtus stock closed at AUD 8.15 on April 6, up 1.7%.
On March 14, the company signed a binding implementation deed with CapVest over a proposal comprising two options: a scheme of arrangement whereby the private equity firm would acquire 100% of Virtus for AUD 8.25 per share, adjusted downwards to reflect any dividend payments; and an off-market takeover bid of AUD 8.10 per share less permitted distributions.
The minimum acceptance threshold for the off-market bid is 50.1%, which means it could proceed without BGH’s 19.99%.
BGH offered to acquire Virtus for AUD 7.01 per share last December and CapVest submitted a higher offer the following month. The company said it would enter exclusive negotiations with CapVest, but Australia’s Takeovers Panel imposed a standstill, ruling that stipulations in the process deed preventing Virtus from entertaining rival bids represented a violation of fiduciary responsibility.
BGH asked the Takeovers Panel to intervene a second time after the company resolved to engage with CapVest after the price was pushed even higher. This was announced on March 1, a day after BGH made a revised offer. BGH claimed the Virtus board had made no attempt to facilitate a genuine auction. The panel declined to conduct proceedings, citing an amendment to the process deed.
Virtus was formed in 2008 when Quadrant Private Equity completed a management buyout of New South Wales-based IVF Australia, the country's largest group of dedicated fertility specialists. It went on to make two bolt-on acquisitions - Victoria-based Melbourne IVF and Queensland Fertility Group.
Quadrant invested a total of AUD 83.7m in the company and held a 43% stake on taking it public in 2013. The IPO was priced at AUD 5.68 per share and proceeds amounted to AUD 338.7m, with the private equity firm making a full exit.
On listing, Virtus operated 34 fertility clinics, 16 embryology laboratories, 17 andrology labs, six diagnostic labs and six hospitals nationwide, employing 80 fertility specialists. Now it employs 128 fertility specialists across 44 clinics, seven day hospitals, and 64 embryology, andrology, and diagnostic labs.
The company has a presence in five countries and completes nearly 24,000 fresh in vitro fertilization cycles every year.
Revenue for the 12 months ended June 2021 was AUD 324.6m, up from AUD 259m a year earlier. Over the same period, group EBITDA rose from AUD 46.2m to AUD 93.4m and net profit increased from AUD 42.6m to AUD 43.1m.
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