A bitter pill for Mediclinic as Spire rejects it

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A bitter pill for Mediclinic as Spire rejects it

Published Date: 2017-10-24 | Source: Stephen Gunnion | Author: Stephen Gunnion

A bitter pill for Mediclinic as Spire rejects it

The hospitals group is considering its options after Spire turned down a full takeover

Spire Healthcare has shunned an offer from Mediclinic to buy the 70% it doesn't already own in the UK hospitals group. Mediclinic offered 150p in cash and 0.232 Mediclinic shares for every Spire share, valuing Spire at just under 300p per share. While that's a 30% premium to Spire's closing price on 17 October, shares in the UK group traded as high as 361p back in July but have come under pressure since reporting a 75% fall in first-half earnings. Spire directors said the offer significantly undervalued it and its prospects.

The Financial Times cited Liberum analyst Graham Doyle saying the offer was surprising on two fronts: "Firstly there is still a great deal of uncertainty around the outlook for Spire's NHS business (30% of revenue) in particular which means that even with the pullback since July, it is not necessarily an attractive time to bid for the group. Secondly, Mediclinic's share price is close to its 52 week low, down some 30%over the past year, making equity expensive while its leverage is set to end fiscal 2018 at 3.2x (Bloomberg consensus)."

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Mediclinic says it's reserving the right to vary the form and/or mix of the offer and vary the transaction structure. It could also come forward with a lower offer. It says a further offer will be made in due course, but there's no certainty that an offer will be made.

Mediclinic's shares ended the day 2.4% lower at R113.



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