Acurity Health Group (“Acurity”) is once again subject to a takeover offer. This time Connor Healthcare Limited (“Connor”) has made a full takeover bid for Acurity. Connor is currently owned by Sydney based private equity firm Evolution Healthcare, but also represents the interests of the Royston Hospital Trust Board and the Stewart family in Christchurch.

Acuity manages five private hospitals in Wellington, Tauranga, Hastings and Auckland, allowing specialists to complete surgery for private healthcare insurers ACC, and outsourced surgery from publicly funded District Health Boards in its facilities.

As a listed company, Acurity has provided attractive returns for its shareholders. However the share price has been held back recently by capital expenditure related to earthquake strengthening required on Acurity’s largest hospital, Wakefield, located in Wellington.

The cash offer has been made at $6.50 per share. A healthy premium of 24% above the previous closing price of $5.25 per share and also a 24% premium to the 30 day volume weighted average price.

Prior to today’s takeover announcement, Acurity was trading on a Price/Earnings (“P/E”) multiple of 12.6 times its March 2014 underlying earnings. The offer price represents a P/E multiple of 15.6 times its underlying earnings.

In July 2012, when the Royston Hospital Trust Board and the Stewart family made a partial takeover offer for 50.1% of Acurity at $6.00 per share, a Korda Mentha independent advisers’ report assessed the value of the company’s shares to be between $6.92 and $7.88 per share. Consequently the Acurity directors’ unanimously recommended shareholders do not accept. Despite this the partial takeover offer was successful.

Combined, the parties associated with Connor already represent 70.7% of the Acurity share register. Therefore, in order for the takeover offer to be successful, Connor will only require acceptance from shareholders representing two thirds of the remaining shares on issue.

The disappointing aspect from an investor’s point of view is that, if successful, the offer by Connor will remove Acurity from the NZX and reduce the already limited investment opportunities in the healthcare sector. Acurity’s shareholders should consider this when making their decision.


Sam Trethewey

Investment analyst

Disclosure of interest: Milford holds shares in Acurity Health Group on behalf of clients.