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NIB Has No Regrets For Passing On Offer
28/08/2008
The Australian Financial Review
The board of NIB Holdings is likely to face some tough questions at the health insurer's annual meeting today after announcing it had not put a takeover bid pitched at a near -100 per cent premium to shareholders.
NIB rejected an "unsolicited, nonbinding and incomplete" bid [believed to be from an offshore institution] worth $1.15 to $1.20 a share – the stock traded between 68¢ and 64¢ last week – because it did not reflect NIB's "robust growth prospects and unique value proposition in Australian private health insurance".
The failure to put the offer to shareholders sparked anger from some institutional investors including Samuel Terry Asset Management's Fred Woollard who likened it to the AMP board's decision to reject a $21 a share bid from National Australia Bank in 1999.
"I'm shocked that they did not put this to shareholders – the owners of the company," he told The Australian Financial Review yesterday. "This absolutely stinks".
"Less than a year ago they did an IPO [initial public offering] at 85¢ - so they thought the company was worth selling at 85¢ - and now the stockmarket has fallen and they are saying "Oh no we don't want to change control at $1.20".
Mr Woollard said that even though the company was performing well "operationally" it still had a duty to put meaningful bids to shareholders.
It is understood that Deutsche Bank advised the interested party, which wanted a health insurance business in Australia.
British group Virgin Money has expressed an interest in offering health insurance in Australia but ruled itself out as the bidder on this occasion.
One of the options proposed by the bidder was a bid via a scheme of arrangement that would have required the approval of NIB's mainly retail shareholders. Such structures usually need a board recommendation and it is understood that NIB directors thought that there was little point putting the bid to shareholders if they were not going to support the price.
NIB managing director Mark Fitzgibbon yesterday said the board and adviser JPMorga. gave "meaningful and close consideration" to the offer before rejecting it because it did not stack up against recent health insurance deals such as Medibank Private's bid for Australian Health Management which was done at around $2621 a member and a 179 per cent premium to net assets, Mr Woollard said.
Mr Fitzgibbon agreed that he could face some "direct questions" at today's meeting in Newcastle, but said "it was the right decision for shareholders in the long term".
NIB shares jumped 9¢ to 74¢ yesterday. They have lost 37 per cent for the year. It is the only listed health insurer in Australia, with the market concerned that proposed federal government changes to the income threshold for the Medicare levy will hurt profiles.
"The NIB board is of the view that the principle benchmarks for any NIB change of control event are NIB's own internal valuation and the transactions recently completed or announced in the Australian private health insurance industry", the company said in a statement to the Australian Securities Exchange yesterday.
A NIB source said the announcement was a " cleansing statement" that would allow it to kick off an on-market buy back of 10 per cent of the stock announce in August.
"NIB remains focused on its capital management plan and intends to commence the buy-back when it is able to do so," the company said.
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