Vision Eye Institute rejects hostile $162 million takeover bid

However Vision has rejected the hostile bid on the grounds that it is all scrip and does not include any cash, which, Vision says, indicates Pulse’s inability to fund a cash bid and its high gearing ratio following recent acquisitions, whereas Vision has low gearing with net debt of less than $10 million.
Vision has encouraged shareholders not to take any action in response to the takeover bid by Pulse Health, adding they should be concerned about Pulse’s prospects and claiming that the scrip component is evidence that the company isn’t strong enough to launch a cash bid.
If the deal were to be approved by shareholders, medical centre and pathology operator??Primary Health Care would??become the second-largest shareholder in the merged entity??with a 12.3 per cent stake, courtesy of its 19.63 per cent share in Vision Eye Institute.??
The largest shareholder would be Viburnum Funds, with a 20.6 per cent stake in the merged group. Viburnum, which has a 29.8??per cent stake in Pulse and a 15.9 per cent in Vision, has already backed the terms of the takeover bid.??
Under the proposed deal Vision shareholders would receive 1.6 Pulse shares for each of their Vision shares.
The offer values Vision’s shares at 88?? each, 31 per cent more than its closing price before the bid was announced.
Both companies were placed in a trading halt on 6 July, prior to the takeover offer being announced to the Australian Securities Exchange.
The merged group would have a market capitalisation of about $255 million and a pro-forma financial year 2015 earnings before interest, tax, depreciation and amortisation of $32.3 million.
“We believe the merger creates a compelling opportunity for both Vision and Pulse shareholders through the creation of one of Australia’s leading providers of specialist health-care services, with a broad network of niche hospitals, surgery centres and ophthalmic practices,” Pulse chairman Mr Stuart James said.
Pulse chief executive Ms Phillipa Blakey said: “The combination of the businesses would form a first-class??organization. Vision’s strong ophthalmic (sic) service and surgery centre network, combined with Pulse’s hospital network and expertise in providing doctors with the service, environment and support they need to fully focus on treating their patients will create a first-class health-care organization.”
Shareholders were also expected to benefit from increased liquidity of the stock, a statent provided to the ASX said.
Vision, Australia’s largest provider of ophthalmological care, reported a flat half-yearly revenue of $54.9 million in February and an adjusted net profit after tax of $6.7 million.
Pulse estimated annual pre-tax operating cost savings of $2 million through the merger, to be realised through a reduction in public-company costs and head-office and administrative functions.??
Headquartered in Melbourne, Vision operates practices across New South Wales, Victoria and Queensland. It has 36 ophthalmologists and 450 other staff at its practices.
Pulse hospitals are located predominantly??in regional Australia. It has??operations in Bega (New South Wales), Noosa, Gympie and Kingaroy (Queensland) and??also operates a rehabilitation hospital in Sydney.
Pulse shares last traded at 56????and Vision stocks were at??75.5??.?? Vision’s shares were down 2.96 per cent to 65.5c before the trading halt.