ACL withdraws takeover offer for Healius

Australian Clinical Labs (ACL) has decided to withdraw its takeover offer for Healius, citing concerns about the deteriorating performance of its pathology services rival. The decision is not due to opposition from the Australian competition regulator. ACL expressed worries that Healius may report a significant statutory loss for the first half of its 2024 fiscal year. ACL also highlighted Healius’s underlying earnings guidance and A$187 million capital raise, which it believed breached the conditions of its offer.

ACL had previously announced its intention to offer 0.74 of its own shares for each Healius share in March. However, due to Healius’s subsequent 45% share-price decline, ACL deemed this offer as no longer appropriate. Nevertheless, ACL stated that it would closely monitor Healius over the following months and might consider returning with another offer.

Despite ACL’s withdrawal, the Australian Competition and Consumer Commission (ACCC) opposed the transaction on Friday. The ACCC expressed concerns that if the merger were to proceed, it would create Australia’s largest pathology services provider, potentially leading to increased prices and waiting times. The divestment of some collection centers proposed by ACL did not adequately address the ACCC’s concerns. ACL indicated that it may challenge this view in court or offer an alternative divestment package in any future offer.

The ACCC further explained that a combination of ACL and Healius would consolidate an already concentrated market. Both companies are among Australia’s top three pathology services providers, serving customers such as hospitals, government institutions, and veterinary clinics. ACCC Commissioner Stephen Ridgeway added that a merger between ACL and Healius would result in the operation of more than 50% of approved pathology collection centers in Australia. In certain regions, they would be the only two pathology providers available to patients.

Despite the withdrawal, ACL emphasized its belief in the potential benefits of a merger between ACL and Healius on appropriate terms. The company stated that the two entities could be worth significantly more together than as standalone companies.