If you didn’t already know, there is a crazy amount of money to be made by IVF operators in Australia in the years to come which is the underlying principle behind a corporate tug-of-war in a bid to acquire IVF company Virtus Health (ASX: VRT) which has intensified again with the latest offer proposal from private equity firm BGH Capital.
What makes the latest offer most interesting is that it comes three weeks after the Board of Directors at Virtus unanimously recommended a rival bid from CapVest, which at $8.25 per share is a better offer on paper than the latest $8.00 per share offer from BGH, which may not get past the shareholder approval process.
Unlike CapVest, BGH has significant voting power in the takeover whereby they already control 19.9% of Virtus Health.
“BGH will vote all Virtus shares that it owns or controls at the relevant time against any CapVest proposal to acquire Virtus by way of scheme of arrangement, and BGH will not accept into any takeover offer from CapVest with respect to all Virtus shares that it owns or controls at the relevant time,” BGH said in an open letter to Virtus Health shareholders.
Making things interesting, the CapVest proposal by Scheme of Implementation requires 75% of the votes cast by, and more than 50% in number of, eligible Shareholders to vote in support of the Scheme to be passed. This is now questionable with BGH’s 19.9% voting against CapVest while vote turnouts in these meetings are almost always below 100% of the share registry.
Effectively, it makes it questionable whether the CapVest offer will secure the shareholder majority, despite it being a superior offer to the one from BGH.
The $8.00 per share offer from BGH would represent a 57% premium on the dividend adjusted closing price on 13 December 2021 of $5.09. When news first broke of takeover talks, VRT’s share price soared above $8.00, and now trades with a market cap of $690 million.
Given the CapVest offer has already been issued in the form of a 133-page Binding Implementation Deed which has been approved by the Foreign Investment Review Board, a substantial amount of expenses have already been incurred by CapVest.
Headquartered in Sydney, Virtus Health is Australia’s largest IVF provider and specialists in reproductive technology. Brands operated under the Virtus banner include Melbourne IVF, IVF Australia, Queensland Fertility Group and more.
In total, Virtus operates 44 fertility clinics, 54 laboratories, 7 day hospitals and 10 diagnostic labs across 5 countries.
For the half year ended 31 December 2021, Virtus Health reported $171.3 million in revenue and $15.1m net profit after tax.
Reproductive services continue to gain traction in Australia and abroad with 15% of couples wishing to conceive being diagnosed as infertile. Additional tailwinds are being witnessed from LGBTQIA+ community starting families while single parent families are also on the rise.
With Australia being leaders in IVF services, Virtus Health has successfully expanded to Ireland, Denmark, the UK and Singapore.
Australia remains their strongest position where Virtus accounts for 37% of the market.
Alfred Chan is an Analyst at Emerald Financial, specialising in ASX-listed small cap companies.
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[…] is an ongoing bidding war over Virtus between private equity firm BGH Capital and CapVest. Each proposal has its merits, yet no conclusion […]
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