Commerce Commission turns down Acurity takeover

The Commerce Commission has turned down an application by the three biggest shareholders of Acurity Healthcare Group [NZX: ACY] to take the private hospital operator over, saying it would leave the group as the "only significant provider in the greater Wellington region" for some procedures.

The antitrust regulator turned down the application by Connor Healthcare to buy the shares of Acurity it didn't already own, which would have put three of the Wellington region's four private hospital under the group's ownership, it said in a statement late yesterday. The regulator wasn't satisfied the deal wouldn't be likely to substantially lessen competition for private hospital medical procedures in the region, it said.

"For medical insurance providers, the greater the number of hospitals they have to play off against each other, the more competitive the price they will achieve which ultimately benefits consumers," commission chair Mark Berry said. "If the acquisition proceeded insurers would have had one less option and for some procedures Connor Healthcare would have been the only significant provider in the greater Wellington region."

Connor is made up of Sydney-based Evolution Healthcare, which separately owns Boulcott Hospital in Lower Hutt, and Acurity's other two major shareholders being the Stewart family and the Royston Hospital Trust. The group had crossed the 90 percent threshold needed to mop up the remaining shares, and needed antitrust approval for the deal to proceed.

The offer was tweaked last month, successfully seeking a two-for-11 fully imputed taxable bonus share issue by Acurity to let shareholders gain access to $2 million in imputation tax credits. The deal meant Connor would cut its price per share to $6.13 from the $7.25 offer, leaving the total consideration paid to investors intact.

Shares of Acurity last traded at $5.881, below the offer price, and have climbed 28 percent this year.

Connor said today it was disappointed with the decision, and is meeting with the regulator to better understand its concerns and if they can be addressed. The group has until Dec. 22 to declare the takeover unconditional under the Takeovers Code, otherwise the offer will lapse.

The regulator said it looked at surgical procedures including orthopaedic hips and knees, colonoscopy and gastropy.

Berry said rival Southern Cross Hospital would be unable to expand to replace lost competition, with its biggest hurdle being attracting enough specialists to perform procedures at its facilities.

(BusinessDesk)