Spire Healthcare has issued a direct rebuttal to a Glass Lewis report which questioned the firm’s decision to accept a £1.4bn merger from Ramsay Healthcare.
The letter from the Spire board rejected or disputed many points raised by consultant Glass Lewis and reiterated its support for the deal.
Australia-based Ramsay originally offered 240p per share for Spire, valuing the business at around £1bn, but after a shareholder rebellion was forced to up this to 250p taking the deal to around £1.4bn.
Spire has already had to extend the time given to shareholders to vote on the troubled deal by another week and the firm’s share price has taken a hit this week.
Its share price soared from 193p on 25 May to 245p on 26 May when the initial offer was made, but after fluctuating between 243p and 253p, it has since dipped from 247.50 on 2 July to 223.50 this afternoon.
Responding to the report
The report issued by consultant Glass Lewis after the original offer and subsequently updated after the increase which criticised the deal has proved a bone of contention with Spire.
Glass Lewis questioned whether the deal undervalued Spire, noting that Spire shares have consistently traded above the original offer price since the deal was announced and asked if “approving the current offer would be in the best interests of shareholders”.
However, Spire highlighted that based on trading information sourced from Bloomberg, over 90% of Spire shares traded between 26 May and 6 July have been at or below the increased final offer price of 250p.
The board also warned if the deal collapsed there was “likely to be an overhang on Spire’s share price given that a material proportion of Spire’s share register has moved from long-term shareholders to hedge funds since the initial offer was announced”.
Higher patient volumes
Glass Lewis also said it believed Spire was well positioned to benefit from increased spending as the UK recovers from the Covid pandemic.
Spire agreed that it had based its acceptance of the offer on higher patient volumes in 2021 and ahead.
“However, increases in patient volumes must be balanced against the need to use existing capacity safely, rising clinical costs, and ultimately the cost of increasing capacity,” it said.
“Historical margins in 2017 and prior years are not reflective of the Spire board’s expectations of long-term margins, given ongoing investment requirements to maintain high standards of clinical care and the challenging regulatory environment.”
And it added that Mediclinic, which has an approximately 30% ownership of Spire, was supportive of the transaction as evidenced by its irrevocable undertaking to vote in favour.
Alongside disputing several other points from Glass Lewis about how to value the business and its income, the Spire board reiterated its belief that the increased final offer is in the best interests of Spire shareholders as a whole, and unanimously recommended shareholders to support it.