Mediclinic has rebuffed a £2bn (R38bn) takeover offer from a group of investors that includes its biggest shareholder, Remgro, with its shares having their best day in about eight months as equity traders bet that the Johann Rupert-chaired investment heavyweight is likely to return with a higher bid.
Along with shipping company MSC, in late May, Remgro offered 463p a share for the 55.4% it does not already own in SA’s most valuable hospital group, which is also listed in London.
But Mediclinic, which runs a network of private hospitals in Switzerland, the Middle East and Southern Africa, said on Thursday its board had unanimously rejected the offer on grounds it undervalues it and its prospects.
The rejected offer is a premium of about 8.9% to its close in London on Wednesday. The bid, which is inclusive of 3p for a recently declared final dividend, is, however, a premium of more than 22% to the hospital group’s share price on May 26, when the proposal was made.
Mediclinic’s shares jumped 4.68% to close at R83.51 in Johannesburg, bringing their gains this year to 22.7%.
Analysts said it was no surprise that the offer was rejected, because it was “opportunistic”, but it may also presage further moves by Remgro.
The stance taken by Mediclinic’s board is likely to test Remgro’s determination to narrow a yawning gap between the values of its share price and underlying assets, which include stakes in FirstRand and Grindrod. The offer for Mediclinic is the latest corporate action by Remgro, which in recent months has agreed to deals with Heineken to offload Distell and with Vodacom to tie up their fibre businesses.
At the end of December, Remgro’s share traded at a discount of more than a third to the sum of its parts.
Remgro holds 44.6% of Mediclinic, implying a cost of about £2bn to acquire the shares it does not own and valuing the group as a whole at £3.41bn.
Nitrogen Fund Manager director Rowan Williams said it was worth noting that the buyout offer was 20% below the 575p first day closing price of the group when it listed in London in 2013. “The offer appears to be very opportunistic given that the recent interim results showed that Mediclinic revenue has recovered to prepandemic levels and the investment case of margin improvement, operational earnings growth and subsequent degearing is gaining momentum,” Williams said.
“We would think that the consortium would have to make an offer closer to 600p per share to convince the Mediclinic board to recommend the offer to shareholders.”
Williams’ views were echoed by Sasfin senior equity analyst Alec Abraham, who said the offer came when Mediclinic was recovering from business disruptions, including Covid-19 and tariff changes in Switzerland.
“The prospects of a normalisation in performance and leveraging the changes [and] investments that the group has made in the business and reducing debt levels should elevate the performance in the medium term,” he said. “There is merit to management’s contention that the offer undervalues Mediclinic and its prospects.”
In a separate statement, Remgro said the consortium was considering its position and there could be no certainty that any offer would be made. If an offer was made, it was likely to be solely in cash, it said.
Small Talk Daily’s Anthony Clark said it was clear that Remgro was looking to clean up its portfolio, having minority stakes in a large number of industries.
“Things always move very slowly in Stellenbosch with regard to [Remgro], but when they do move, they tend to move with big news and with momentum,” Clark said.
“Perhaps, the Mediclinic transaction is part of a much wider restructuring of the company that the market has been anticipating, and hoping for, for a number of years,” Clark said.
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