There was much drama at the extraordinary meeting of Symbion Health shareholders this morning when the mercurial Ed Bateman from Primary Healthcare sent his proxy along to tell the meeting he was indeed going to use his 20% stake to scupper the merger with Heathscope. And that’s what he did.
The meeting just oozed bad blood and it was later revealed that Caledonia Investments, which is a supportive Primary Healthcare holder with 6.3%, recently bought more than two million Symbion shares and voted against the deal. They were the only institutional opposition, although a few US index funds said they weren’t allowed to vote.
Symbion chairman Paul McClintock, John Howard’s former Cabinet Secretary, wasn’t particularly democratic when he rejected Primary’s request to have scrutineers appointed for the ballot and also initially said the proxy votes would not be revealed until after the vote.
He relented after I got up and gave him a lecture about basic democracy and
the figures revealed that 333.78 million proxies were in favour and 132.32 million against, the vast bulk being Primary’s 20% stake. The final vote was extremely close with 73.8% in favour but it was virtually impossible to achieve the necessary 75% yes vote when 20% of all shares on issue are voting against.
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Symbion has so far spent $40 million on the failed proposal and all its various advisers are now salivating at the prospect of quickly renegotiating a new deal with Healthscope, which will probably involve the straight sale of less than 50% of the company’s assets, because that won’t require shareholder approval.
I’m not aware of this situation occurring before in Australia. Two companies proposed a merger that was widely endorsed by directors, analysts and commentators alike. A competitor then comes along and buys 20% to vote the
deal down without ever specifying an alternative transaction.
Primary is capitalised at $1.5 billion and Bateman owns 17.5%. The company has borrowed more than $500 million from NAB which is costing it $3 million a month in interest. It could have walked away with a $40 million profit on its stake and an 11% stake in the combined company.
Ed Bateman really doesn’t care. He thinks he’s running a private company. Investment banker John Wylie sacked him as a client earlier this year after he inappropriately bought and then sold shares in Symbion during takeover negotiations.
Then again, shares in Bateman’s company, which concentrates on pathology, have rocketed from $3 in late 2002 to a peak of $14 earlier this year and today gained 5c to $12.20. These guys love John Howard’s health spending
binge over the past decade.
Shares in Symbion and Healthscope were still suspended early this afternoon but both are expected to come under selling pressure, even though they are likely to quickly cut a new deal once they can work through a few stamp duty and
capital gains tax issues.
If that happens, Bateman won’t be able to do anything to stop it.