Symbion, Healthscope plan fresh talks after bid fails

MELBOURNE (Reuters) - Australian healthcare group Symbion Health Ltd SYB.AX and suitor Healthscope Ltd HSP.AX plan fresh talks on a tie-up after shareholders rejected Healthscope's A$2.9 billion ($2.4 billion) offer on Tuesday.

Rival group Primary Health Care Ltd (PRY.AX), voted its 20 percent strategic stake in Symbion against the deal, which Symbion said was enough to scupper it. The bid won 73.9 percent votes in favor, but required 75 percent to pass.

Primary has proposed buying some Symbion assets and has said it might make a private equity-backed bid for Symbion as the three companies jockey for position in a consolidating healthcare sector.

Following the vote, Symbion called on Primary to show its hand, but Primary said it would await the outcome of talks between Symbion and Healthscope before making its next move.

"As Symbion's largest shareholder, Primary would welcome the opportunity to review any new proposals from Healthscope and Symbion if they added value for Primary and other shareholders," a Primary spokeswoman said.

Symbion shares fell after the vote and closed down 1 percent at A$4.19 in a firmer market .AXJO. Shares in Healthscope lost 1.2 percent to A$5.78 and Primary eased 0.3 percent to A$12.02.

Symbion, the medical testing, radiology and pharmacy group that remained after Mayne Group spun off its drugs arm in 2005, said it may now pursue other proposals, including an alternative transaction with Healthscope.

"The one plan B mentioned in the past was an asset sale arrangement where a portion of the assets, which might include pathology, might be sold to (Healthscope) on an asset-sale basis which requires a far lower threshold of shareholder support," said Austock analyst David Grossman.

Healthscope said in a statement it will start fresh talks with Symbion on alternative proposals.

CONSOLIDATION TARGET

Symbion, which runs a network of more than 80 medical testing laboratories across Australia, has long been seen as a likely target of consolidation in an industry buoyed by an ageing population and growing private health insurance membership.

It rejected a A$2.3 billion approach from Primary earlier this year, saying it did not believe Primary's estimates of synergies from a deal were realistic or achievable, before accepting the Healthscope-led approach in May.

Primary's 20 percent Symbion stake, worth around A$550 million based on Symbion's closing share price on Monday, is the most it can hold without having to make a takeover offer under Australian corporate law.

Under the rejected proposal, Healthscope, which operates private hospitals and medical testing services, would have taken Symbion's medical testing and health centre business, while its private equity partners, Archer Capital and Ironbridge Capital, would have taken Symbion's healthcare products business and pharmaceutical assets.

Healthscope, which last week rejected Primary's proposal for some Symbion assets, said it was optimistic on finding a way forward.

"Although we didn't quite get there, it is abundantly clear that our proposal is extremely popular with Symbion shareholders as a whole," said Healthscope Managing Director Bruce Dixon.

Symbion Chairman Paul McClintock said it was premature to speculate on the outcome of discussions with Healthscope.

"Our task is to look at the deal that we put to shareholders, and that got such a strong endorsement from the non-Primary shareholders, to see whether there are ways in which we can replicate the commercial end result," he said.

He had told shareholders ahead of the vote that no superior proposal to the Healthscope bid had been received prior to the meeting, and that Symbion would continue as a stand-alone entity if the bid was rejected.

($1=A$1.21)

(Additional reporting by Michael Smith)

(Editing by Jonathan Standing & Lincoln Feast; Reuters Messaging: ben.wilson.reuters.com@reuters.net; Tel: +61 2 9373 1800))