DCA dissects multiple takeover bids in $2.5bn private equity raid
Elizabeth Colman, Robert Clow
September 09, 2006
DIAGNOSTICS and aged healthcare giant DCA Group is considering multiple takeover offers in what appears to be a private equity raid which could see the company sold for around $2.5 billion.
Shares in DCA surged 17 per cent or 45c, closing at $3.05, with 42 million shares changing hands yesterday after a brief announcement from the company.
The jump in price valued the company at $1.4 billion.
Following weeks of rumour, DCA Group, Australia's biggest owner of radiology centres, confirmed it had received proposals.
DCA told the Australian Stock Exchange that it was considering "highly conditional proposals regarding the company's ownership from independent parties" and had appointed investment bank UBS as defence adviser and law firm Freehills.
The company did not disclose the bidders, but The Australian understands Ironbridge Capital has expressed interest.
Pacific Equity Partners and Macquarie Bank are also believed to be interested.
Nonetheless, shareholders said that DCA was not under an urgent obligation to accept proposals.
"There's a huge difference between what people view as the price to pay operationally, and what they'd pay strategically - DCA is in quite a strong position," Rob Patterson from fund manager and DCA shareholder Argo Investments said.
Ramsay Health Care, which is Australia's biggest private hospitals provider, decided not to put a proposal to DCA.
"We looked at it but decided it didn't suit us," Ramsay managing director Patrick Grier said yesterday.
Some analysts speculated that a buyer could separate the company's aged care business.
Macquarie and Ironbridge are already investors in the aged care business.
PEP sold its New Zealand-based Guardian aged care business to DCA and has separately looked at MIA, a diagnostic group that has now been merged into DCA.
All bids are likely to be made by consortiums of more than one party.
DCA said it would seek unanimous board approval before accepting proposals.
Market analysts said that a takeover offer that split the diagnostic and aged care businesses would also alleviate competition concerns if the buyers wanted to sell to other operators such as Symbion Health or hospitals provider Healthscope.
But one healthcare market analyst said DCA's existing management was viewed as strong and, as such, an industry operator was not necessarily involved.
The company was also said to have the "best margins in the business" and was heavily leveraged with about $700 million in debt.
"There's not going to be a whole lot of savings," said another analyst, who asked not to be named.
He added that while the hallmarks of private equity were present, the DCA deal was not identical to Coles Myer, which this week rejected a takeover bid by US firm KKR.
DCA last month forecast a modest lift in profit for the year, despite salary costs.
It posted a $73.3 million net profit for 2005-06, up 30.4 per cent, and in line with previous guidance.
However, perceptions that the company was underperforming have persisted since a major profit downgrade in May.
Shareholder Merrill Lynch also this year appeared to dump its 5 per cent stake in the business.