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NIB Comes Under Fire For Rejecting Takeover Offer
28/08/2008
The Australian
THE board of health insurer NIB will come under fire from investors at today's AGM after rejecting a takeover proposal.
That proposal was pitched at almost double its market value.
A month after denying media speculation that it had received takeover proposals from offshore buyers, NIB yesterday said it had knocked back an indicative offer of $1.15 to $1.20 per share because it undervalued the company and its growth prospects.
NIB confirmed it had been approached by a third party with a "confidential, unsolicited, non-binding and incomplete proposal" to take a controlling stake in the company and establish a strategic alliance.
However, investors who had bought into the company's initial public offering at 85c per share last November only to watch their stock slump as low as 55c this year were unhappy at being denied the opportunity to sell out at a profit.
Fred Woollard, chief executive at Samuel Terry Asset Management, said he was shocked by the NIB board's decision to reject the bid proposal.
"I think it's outrageous that they've rejected this offer without giving the shareholders an opportunity to decide for themselves," he said.
Mr Woollard said he could not understand how the board could believe the shares were worth 41 per cent more than they were sold at a year ago when the rest of the share market had fallen by 40 per cent over the same period.
"They were prepared to sell at 85c a year ago and today they're telling us the shares are too cheap at $1.20," he said.
"With the stock market plunging recently, I have no doubt that many shareholders would love to be given the chance to sell at $1.20 per share."
NIB shares rose 9c to 74c yesterday.
NIB chief executive Mark Fitzgibbon defended the board's decision and said the current share price was not indicative of the company's underlying value.
"The board has a view about the intrinsic value in the business, based on the modelling that we do as a company and based upon comparable transactions over the past 12 months," he said, citing the imminent $367 million takeover of AHM by Medibank Private and $2.4 billion takeover of MBF by BUPA earlier this year.
"We trade at quite a significant liquidity discount ... we're a very thinly-traded stock. We don't think that's representative of the value of the company."
Mr Fitzgibbon also noted that since listing NIB had increased its net margin forecast from 2.5 per cent at the time of listing to 4.4 per cent, while the removal of MBF and AHM from the market had increased NIB's strategic value. "The dynamics of the company have changed," he said.
"We see NIB playing a central role in the inevitable consolidation of this industry -- the board has an open mind about how that plays out and whether we are an acquirer or a target."
Mr Fitzgibbon said the announcement was made as a "cleansing statement" in order to allow a planned buyback of up to 10 per cent of the company's shares to proceed.
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