Private hospital operator Healthscope has rejected two competing takeover proposals that it says undervalue the company, even as it lowers its earnings guidance due to the closure of two underperforming hospitals in Victoria.
Healthscope refused to open its books to either Brookfield Asset Management or a consortium involving private equity firm BGH Capital, saying the $4 billion-plus bids do not reflect the value of its property portfolio and an anticipated improvement in operating performance in 2018/19.
Healthscope has also announced a suite of measures to boost its performance, including the closure of Geelong Private Hospital and Cotham Private Hospital, and taking a $68 million impairment against Frankston Private Hospital.
The earnings loss from those hospitals, and softer than expected market conditions, has led to a downgrade of the company’s guidance for 2017/18 hospital operating earnings, from about $359 million to between $340 million and $345 million.
Chief executive Gordon Ballantyne said Healthscope regretted the closures, which the Australian Nursing and Midwifery Federation (ANMF) said will affect more than 200 nurses.
“We conducted an exhaustive evaluation of alternatives but unfortunately it is simply not viable to continue operations into the future,” Mr Ballantyne said.
“We are aware that this will be a very difficult time for our staff and we are working proactively with them to explore redeployment and relocation opportunities.”
The two hospitals will be closed over the next four weeks, Healthscope said.
“The closure of these health facilities and the loss of hundreds of jobs are incredibly distressing for our members and their families,” ANMF Victoria branch secretary Lisa Fitzpatrick said.
The closures will cost Healthscope about $17 million, which includes redundancies.
Healthscope said the two takeover proposals also did not take into full account an earnings contribution from its investment in Sydney’s Northern Beaches Hospital, which is due to commence operation in October and expected to deliver a minimum 15 per cent earnings return on investment.
Healthscope will consider the sale and leaseback of 29 properties it said are likely worth more than the $1.3 billion recorded on its balance sheet, and has put its Asian pathology business up for sale following expressions of interest from possible buyers.
Shares in Healthscope, which had risen by nearly 28 per cent since the announcement of the initial BGH offer on April 26, were down 10 cents, or 4.1 per cent, at $2.36 at 1250 AEST.