Healthscope Limited (ASX:HSO) is facing tough pressure from its investors. Joining the list of Healthscope shareholders, DNR capital has also raised questions to the chairman Paula Dwyer, regarding the disclosure of the company’s books to a private equity firm led by Ben Gray’s BGH capital.
The second largest private hospital operator of the nation has received a renewed offer of $2.36 cash per share from BGH last week that has estimated the company valuation to $4.1 billion ever since the firm knocked its first offer in May.
The investors have decided to go on strike against the remuneration report and while addressing the annual general meeting the chairman mentioned that the decision to grant due diligence remains on priority. Despite of massive support to the strike action from the institutional investors joining the 9.3% shareholders of Ellerston capital the board can resist the pressure to finally grant the due diligence.
HSO in its annual general meeting addressing its shareholders didn’t convince many of them. In its annual general meet, HSO reported 4.4% slip to $375.9 million in terms of group operating EBITDA. Decline in the statutory net profit after tax from continuing operations up to $75.8 million was reported which was the result of significant one –off expenses of $75.4 million after tax primarily associated with hospital closures and the recognition of lease provision in the Victorian hospital portfolio.
While addressing the shareholders, major concerns faced by the private hospital operators was not at all alleviated and this threw a proper light on such issues which can impact the growth plan of the company along with the complete domain. HSO performance and success along with future projects was discussed without taking into consideration the current condition prevailing across private hospital operators and such issues have raised concern among the shareholders.
However, management seems very confident about the growth plan which includes plan to sell 20 hospitals and lease them back to provide value to the shareholders. The estimated value from these properties is approximately between $1.6 billion -$1.8 billion, well above the book value of the company at $1.1 billion.
However, the valuation doesn’t convince all. Implied multiple looked on higher side. The stake has been increased by the bidding group indicating the seriousness of their intention.
Shareholders are still struggling with the proper justification from the company on the property plan. Shareholders are not convinced with the higher risk adjusted valuation of the real estate. With lot of contingencies attached to the real estate it is difficult to achieve such kind of value lift to equity holders.
More than half of the registered shareholders demand the board to grant due diligence to the private consortium. Shareholders have raised questions and asked the company to allow the private equity to its data room but so far, no constructive action has been taken in this direction by the company which signals lack of confidence the company has on it growth plan.
With the company not proceeding as per the proposed property spin –off plan the bid appears highly conditional to the shareholders and the scrip after making a day high of $2.105 trades at the current levels of $2.07.
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