- Unsolicited possible 463p cash offer rejected by the board
- Board claims offer significantly undervalues the business
- Low 9% premium leaves open possibility of higher bids
Investors seemed underwhelmed by news that private hospital group Mediclinic International (MDC) had received an unsolicited and conditional 463p cash offer from a consortium comprising Remgro and MSC Mediterranean Shipping Company.
The shares traded a mere 2% higher at 433.4p on Thursday, some 7% shy of the offer price after the board of Mediclinic rejected the proposal on the grounds that the potential offer ‘significantly undervalued’ the company and its prospects.
Mediclinic urged shareholders to take no action at this time and cautioned there is no certainty an offer will be made. Under London stock exchange takeover rules, the consortium has until 7 July 2022 to announce a firm intention of an offer or walk away.
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Remgro is Mediclinic’s largest shareholder, owning 44.6% of the shares and is chaired by billionaire Johaan Rupert, who is also chairman of Swiss luxury goods company and Cartier and Montblanc brands owner Richemont.
Remgro was founded in the 1940’s by Rupert’s father Anton and is a diversified investment company. Mediclinic was founded in 1983 in South Africa after Anton Rupert commissioned current chairman Edwin Hertzog to undertake a feasibility study on the private hospital market.
The board’s unanimous rejection of the offer and skinny premium of around 9% to the prior day’s closing suggests the proposal was an opening gambit.
Takeover deals usually require at least a 30% premium to get over the line.
Russ Mould, investment director at AJ Bell, commented: ‘This may not be the last we’ve heard from Mediclinic’s suitors, Remgro and MSC, as takeovers often involve putting a starting number on the table and testing the water to see how it goes down.
‘Any rejection can quickly be followed by a higher bid if the suitor(s) really wants the target business.’
Mediclinic recently (25 May 2022) delivered a strong set of full-year numbers with revenues exceeding pre-pandemic levels and improved profit margins.
The company gave a positive outlook for 2023 saying it anticipated further revenue growth, margin expansion and improved earnings. The shares are up 36% year to date.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Martin Gamble) and the editor (James Crux) own shares in AJ Bell.
