3 Reasons Australian Unity Rejected $2.5b Fund Offer

3 Reasons Australian Unity Rejected $2.5b Fund Offer

In March, Australian Unity Private Health Insurance bluntly rejects $2.5 billion bid for its unlisted healthcare real estate fund from Canada’s NorthWest Healthcare Properties. The offer had been pitched at a 14 per cent premium to the trust’s wholesale unit price and a 21 per cent improvement to where the wholesale units were trading in December. This bid, however, was not enough to sway the board of Australian Unity Funds Management, which is responsible for the property trust.

Canada’s NorthWest Healthcare Properties has stepped up the pressure by requesting the unitholders register, a move that lays the groundwork for a potentially decisive vote on the property trust’s future by its investors. They, in partnership with  Singapore’s GIC, have been at loggerheads with the manager of the Australian Unity Healthcare Property Trust after lobbing a $2.20 per unit bid two weeks ago and establishing control over a 16.2 per cent stake. That stake allowed the Canadian team to request the register and call a unitholders meeting that could vote on changing the property’s trust manager or endorse NorthWest’s takeover offer.

On Friday, the fund’s Australian Unity-run manager broke cover, issuing a firmly worded dismissal of the Canadian offer in a letter to unitholders. They defended their refusal to engage further with the sweetened takeover bid during an investor webinar on Tuesday for the following reasons:

1. The fund manager concluded that the higher offer still fell well short of the portfolio’s value:

During the webinar, unitholders were told that AUFM was “surprised” by NorthWest’s assertions that the fund manager had not engaged with its offers. Rather, the fund manager had engaged in multiple discussions with the Canadians over the past two months, sources who attended the webinar said they were told. Those discussions had followed “careful consideration” of NorthWest’s initial offer in February and it’s improved $2.35 a unit offer made last month. After that, however, the fund manager had concluded even the improved offer still fell well short of the portfolio’s value and that it was not in the best interests of unitholders to engage further with the Canadians.

2.  The fund manager acts in the best interests of the board:

In response to another accusation from Northwest which stated that the fund’s board lacks independence, unitholders on the webinar were assured the fund manager was following its obligations to act in their best interests. Further revaluations of the $2.47 billion portfolios could be expected during the year, the webinar was told.

3. The fund manager set out some detail of the fund’s $1 billion development pipeline:

This was a topic of some interest because NorthWest has said it may be willing to further improve on its latest offer if it were allowed due diligence and its investigations revealed further value in the portfolio. The fund’s development pipeline includes more than $600 million of investment opportunities across eight specific projects. More than $500 million in development, however, was simply earmarked as undefined “greenfield sites” and “brownfield expansions”. Whether and when the closed fund will be opened to new equity was also a topic of keen interest for investors. During Tuesday’s meeting, the fund manager acknowledged fresh equity would be needed to drive the ambitious development pipeline, sources said.


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