Mediclinic Drops Spire Takeover After Second Bid Is Rejected

JOHANNESBURG (Capital Markets in Africa) – Mediclinic International Plc dropped plans to buy the rest of Spire Healthcare Group Plc after its own investors and the U.K. private hospital operator spurned a deal that would have valued the target company at about 1.27 billion pounds ($1.68 billion).

The South African hospital operator said the two sides were unable to reach an agreement following a month of talks after its Oct. 18 proposal was rejected as too low. Mediclinic had made another bid on Nov. 17, suggesting a premium of about 37 percent over Spire’s trading price before the first offer was made, which was also rebuffed. Shares of Spire plummeted to the lowest in about a month.

The decision to walk away was announced days after the South African company indicated that the slump in its own stock since the transaction was proposed would be a factor in determining its future steps. Shares of Mediclinic, which owns almost a third of Spire, have dropped almost 14 percent following the offer amid concern that the company doesn’t have the bandwidth for another large transaction before it fully digests earlier deals.

“Mediclinic is disappointed,” the company said in a statement in London. The company “will continue to take a disciplined approach to capital allocation to ensure investments are in the best interests of Mediclinic shareholders.”

The hospital operator faced a 5 p.m. Monday deadline in London on the deal, under U.K. law, and was required to make a firm bid or abandon the effort. The company had raised its offer to 315.5 pence a share from 300 pence apiece, the U.K. company said in a separate statement on Monday.

Shares of Spire plunged 7.3 percent to 250 pence as of 8:07 a.m. in London trading after earlier dropped to its lowest since Oct. 20. The stock had soared 17 percent since Oct. 17, the day before it received the first offer.

Mediclinic remained mostly unchanged at 556 pence on Monday.

Deal Spree
The takeover would have been the swan song for Chief Executive Officer Danie Meintjes, who has transformed Mediclinic through a series of acquisitions in Africa, the Middle East and Europe during his tenure. Meintjes, who plans to step down in July, began investing in Spire in 2015 to tap growing demand for private health services as the U.K.’s state-run National Health Service comes under increasing budgetary constraints.

Meintjes’s recent transactions include the purchase of United Arab Emirates-focused Al Noor Hospitals Group Plc assets for about $10.2 billion in February 2016, and a takeover of Swiss hospital Linde Holding Biel for $112 million earlier this year.

The U.K.’s proposed split from the European Union in 2019 may provide an opportunity for companies like Johannesburg-listed Netcare Ltd. and Mediclinic to pick up the slack in offering critical services to the aging British population. Reduced labor mobility and a drop in the national income used to fund public services are likely to bring additional pressures on the nation’s underfunded, overcrowded health-care system following Brexit.

Source: Bloomberg Business News