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NIB Quiet On $620m Offer
28/08/2008
The Sydney Morning Herald
THE health insurer NIB will come under pressure from shareholders at its annual meeting today to reveal the mystery bidder behind a potential $620 million offer for the company after the two biggest private health funds, Medibank Private and BUPA-MBF, ruled themselves out as likely suitors.
NIB revealed yesterday that it had received an approach from an unnamed party that had involved a possible bid of between $1.15 and $1.20 a share.
However the Newcastle-based health fund, the fifth largest fund in the country and the only listed one, said it had rejected the unsolicited attempt to acquire a controlling stake because it undervalued the business.
The speculative offer valued NIB at $283 million more than its sharemarket capitalisation at yesterday's opening price of 65c a share. Its stock rose 9c, to 74c, on the back of an ASX announcement outlining details of the approach.
That still left its shares as much as 46c adrift of what its suitor was prepared to pay. The top end of the price range is just below the highs that NIB's stock has traded at since its ASX listing last November at 85c a share.
But the global credit crisis and the resulting market turmoil has since led to a fall in the share price to below 60c in recent months. In yesterday's rise in the company's shares their value increased 14 per cent, to $383 million.
Since both Medibank Private and the newly merged BUPA-MBF have declared publicly they were not in the market for NIB, market watchers speculated on an approach from a general insurer like QBE or a consortium of health operators wanting to create a third major player in the industry.
The managing director of NIB, Mark Fitzgibbon, refused to disclose the identity of the bidder but told the Herald the proposal had "come out of the blue".
Mr Fitzgibbon is a supporter of consolidation in a highly fragmented industry in which there have been three big mergers this year. He said he was not surprised that NIB had been approached.
"We have an open mind as to the role NIB will play in this consolidation," he said.
Mr Fitzgibbon said the rejected offer did not meet the board's valuation or the prices that had been paid for its rivals such as MBF, AHM and Manchester Unity.
The rejection will be challenged by investors who want the board to reopen the stalled discussions and put a fully formed bid direct to shareholders.
Fred Woollard, the managing director of Samuel Terry Asset Management, which has a small stake in NIB, said: "We're very unhappy with the situation given the share price performance and believe that shareholders should be able to make their own minds up about this offer."
Yesterday's disclosures came as a debt-free NIB confirmed it would go ahead with an on-market buy-back of 10 per cent of its shares.
It will use some of the $100 million in excess capital it had built up to fund acquisitions, two of which - AHM and Manchester Unity - it has missed out on.
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