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Australia-based listed fertility specialist Virtus Health, which also has a footprint in Ireland, Denmark, the UK and Singapore, is the subject of a takeover bid. HBI speaks to an operator source to find out more about the prospects of one of the largest international fertility groups delisting.
A proposed buyout by private equity firm BGH Capital at A$7.10 per share, valuing the business at A$607.3m (US$441.4m) was made last month. Shares in the group have soared 25% since then, and that price represented a 36% premium on the stock’s pre-offer close. BGH took a 10% stake in the business. But since then, Virtus has received a second offer at A$608.9m ($442.6m) from European Private Equity firm Capvest Partners. That offer – at A$7.60 per share in cash – is a premium of around 13.6%.
Our source explains: “These are interesting offers with interesting timing. They come after Virtus tried to acquire (affordable fertility treatment chain) Adora in Australia back in August last year, but that deal was squashed last December after the Australian Competition and Consumer Commission (ACCC) stepped in”. The ACCC went to court in October last year to obtain an injunction to restrain Virtus from proceeding with the deal, saying that the acquisition would be likely to lead to substantially less competition, especially since Virtus already had a significant market share in Brisbane and Melbourne. Adora had also been a significant force in driving prices down.
Our source adds: “What’s interesting from an international perspective is that this decision suggests that the Australian market is as sewn up as it can get, and that should prompt Virtus to continue to look at other jurisdictions. The future is uncertain. While the board was considering the first offer, it prompted interest from other parties. So there is a distinct possibility that the group could delist, and I think from Virtus’ perspective this could be a good thing.
“When it comes to M&A, I hear Virtus has been in the running for a number of assets but effectively priced out of deals. A PE takeover, bringing more firepower to the table, would be an interesting development in the long term. PE is often a catalyst to growth, and you have to look at the prices big assets are selling for these days. While you might pay 8-9x EBITDA in Australia, that same asset could be 16-17x in Europe.
“If a deal is done, you might expect to see Virtus more active in European M&A and beyond”.
HBI understands Virtus has provided CapVest with a period to conduct due diligence ahead of a binding offer.
Globally, Virtus runs more than 40 fertility clinics. In Australia, it also operates seven day hospitals and the Virtus pathology and reproductive genetics service.