The NIB Holdings Limited (ASX: NHF) share price has received a nice boost today after the company's shares were released from a two-day trading halt.
The shares hit a high of $6.11, marking an increase of 7.4% compared to their previous closing price. Over the past 12 months, the shares have traded within a range of $4.35 to $6.48.
The reason for the trading halt, and this morning's subsequent share-price rally, was NIB's acquisition of specialist corporate private health insurance business, GU Health, for $155.5 million. The business services over 34,000 policyholders across more than 260 corporate clients and has been a wholly owned subsidiary of Australian Unity since 2005.
Commenting on the strategy behind the acquisition, NIB's Managing Director, Mark Fitzgibbon, said:
"We've been impressed with the calibre of (GU Health's) people, strong business-to-business relationships and purpose built technology. All have helped deliver a market leading capability in the corporate group market. What's been achieved by the business is also a real credit to the ingenuity of its parent company Australian Unity."
"Overall the acquisition supports our plans to increase our presence in the corporate group market. It adds materially to both our Australian residents and international health insurance businesses and hopefully, will help grow our nascent outbound business. We have a strong view at nib about how globalisation increasingly demands that health insurers are able to seamlessly offer customers global cover".
The purchase price for the business was around 15x estimated net profit after tax (NPAT) for 2018 before synergies are taken into account, while the business also generated premium revenue of $193.5 million in the 12 months ended 30 June 2017. NIB expects that annual synergies could exceed $3 million by the time the business is fully integrated.
NIB Holdings raised $60 million by way of an (oversubscribed) institutional placement to help fund the deal, with new shares issued at a price of $5.65 per share. That represented a discount of just 2.1% compared to NIB's previous closing price of $5.77. NIB is also raising $15 million via a non-underwritten share purchase plan (SPP) from existing shareholders and a new debt facility for the balance of the transaction. The acquisition is expected to complete in the final quarter of the 2017 calendar year.
This appears to be a reasonable acquisition for NIB, and is clearly welcomed by the market, as reflected by the surging share price this morning. By comparison, the Medibank Private Ltd (ASX: MPL) share price has lifted 0.7% this morning and the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is up 0.2%.
Although NIB's share price is sitting closer to their 52-week high than their 52-week low, the company could still be worth a closer look by long-term investors.
