In a sign that the 2019 business season has wasted little time starting up again after the festive break, Chinese investment group Jangho has confirmed that it has put in a $2bn bid for Australian health giant Healius. The end of last year saw investors and businesses either buying out or restructuring a spate of health companies, and it appears that the world is in the middle of a rapidly changing health sector.
Companies and investors typically race to make the most value in an industry before veering off into new developments and technologies, and these continuing market moves suggest that healthcare may well be one of the markets to watch early this year.
Healius, which is known as the largest owner of private GP clinics and pathology centers in Australia, has attracted Jangho’s attention. The Chinese company made its name in its native country in the building supplies market, but now it seems that a fairly aggressive expansion into Australian healthcare is next on its list.
The offer itself is highly conditional, and it is yet to be clear whether Healius will accept it. Some market analysts expressed concern that this could put doctors off using Healius’ services or joining the company while uncertainty reigns over it.
Any deal is unlikely to be quick due to a lack of obvious funding sources and many regulations that would need to be addressed in terms of overseas investment in a vital public sector. There are also continuing worries over Chinese investment in Australia, as evidenced by the Huawei fallout.
That situation involved telecommunications, and it is not yet known how sympathetic that Australian Prime Minister Scott Morrison’s administration will be regarding potential geopolitical rivals being able to control some of the most necessary sectors in the country.
Jangho is already involved with Healius and presently owns 16% of the company, which was known as Primary Health Care until fairly recently. The non-binding offer for full ownership has set a price of $3.25 a share. When the news broke, Healius’ current share price increased by 7.8% to $2.63.
Despite the bid being a 23% premium over the total share value at which Healius recently closed, it is still some way below the peak that the company hit in March 2018 at $3.95 per share. Interestingly, some market rumors must have been bubbling away under the surface, as shares rose 9.4% on Wednesday despite there being no official announcements of any kind.
Healius did not recommend any shareholder action at present and said that it would be evaluating all options before making a decision. This suggests that the board needs time for due diligence while considering Jangho’s proposal.
JPMorgan Analyst David Low, who specializes in healthcare, said that the news was a bit of a shock given how quiet the market usually is at this time of year and how few moves take place this early on. He added that it is fairly possible that the bid not only caught the market out but also Healius itself, as the company may not have been readying itself for a full incoming takeover.
Low said that although the deal represents a current premium on share price, the impact on business if it drags on could be significant.