Spire Healthcare has refuted concerns raised by proxy advisory firm Glass Lewis over its proposed £1.4bn takeover, as it reiterated its support for the deal.
The UK hospital group initially agreed in May to be acquired by Australian operator Ramsay Health Care for 240p-per-share. That was increased to 250p-a-share this week after some shareholders – including Fidelity International, which has a 9% stake, and Tosca Asset Management – voiced concerns that the offer was too low.
Ahead of the sweetened deal being announced, Glass Lewis had issued a report criticising the takeover.
It has since updated the report to acknowledge the increased offer, but retained its recommendation to vote against it.
In the letter to Glass Lewis, sent on Thursday, Spire said: “The Spire board reiterates its unanimous recommendation to shareholders to vote in favour of the transaction. The board has assessed the transaction against Spire’s existing strategy and long-term forecasts, and concluded that the transaction is in the best interest of Spire shareholders.”
It also noted that three other proxy and corporate governance advisory firms – ISS, Pirc and IVIS – had published recommendations in favour of the deal.
The Glass Lewis report had raised a number of concerns, from valuation to due process. It argued that the healthcare provider was already well-positioned to benefit from increased spending as the UK recovers from the pandemic.
In response, Spire argued that the increased offer represented an enterprise value of 21.6x adjusted earnings before interest and tax of £97.6m in 2019, prior to the pandemic.
“Near-term and longer-term increase in patient volumes must be balance against the need to use existing capacity safely, rising clinical costs and, ultimately, the cost of increasing capacity,” it wrote.
“These factors will have an impact on the operating and cash margins of the business.”
It also confirmed that while it had been “open” to competing offers, it was not currently in receipt of any approaches or offers from other bidders, and said it had fulfilled all its obligations under the Takeover Code.
The letter will be forwarded by Glass Lewis to subscribers.
On Wednesday, Spire extended the voting deadline, from 12 July to 19 July, to allow all shareholders time to consider the revised offer, following a request from “a number of investors”. Spire needs 75% of investors to back the deal but already has the approval of Mediclinic, its largest shareholder with just shy of 30%.
