The Pulse Health Limited (ASX: PHG) share price jumped 30% to 43 cents today, after the hospital operator received a takeover offer from Healthe Care Australia for 47 cents per share in cash.
Healthe Care is part of China's Luye Medical Group, and was acquired by Luye in April this year at a cost of $938 million from private equity firm Archer Capital. Healthe Care is Australia's third-largest private hospital operator behind Ramsay Health Care Limited (ASX: RHC) and Healthscope Ltd (ASX: HSO), operating 17 hospitals, 1,800 beds and with more than 4,500 employees.
Pulse Health operates out of 13 locations including eight hospitals and five day surgeries across Australia and New Zealand. In the last financial year (FY16), Pulse saw revenues rise 29% to $72.4 million, earnings before interest, tax, depreciation and amortisation (EBITDA) of $9.1 million and underlying net profit after tax up 14% to $4.6 million.
The forecast for FY17 was even better with EBITDA forecast to rise more than 48% to at least $13.5 million. No wonder Healthe Care swooped now.
Despite the bid being non-binding and indicative as well as subject to due diligence, Pulse says it will engage further with Healthe Care, with due diligence expected to be completed with six weeks. The company also says shareholders should not make any decision as yet. The deal may also require Foreign Investment Review Board (FIRB) approval – like the Healthe acquisition did.
No doubt the company will need to consult with its largest shareholders including Viburnum Funds which holds 19.2% of the shares and Sante Capital Investments which holds another 10.9%.
Pulse had tried to buy Vision Eye Institute in 2015 to expand it day surgery locations but was beaten to the punch by a better offer from Chinese company Jangho. The company has also been fielding offers in recent months – as we noted back in July.
The takeover of Pulse Health could also have consequences for other Australian health care stocks. It looks like Chinese companies are not only attracted to our baby formula and vitamins but also our health care operators.
Could we see bids for the likes of Integral Diagnostics Ltd (ASX: IDX) or Capitol Health Ltd (ASX: CAJ) in future? Possibly – although that is a highly speculative proposition.
