The Healthscope Ltd (ASX: HSO) share price has steadily fallen after rejecting the takeover proposals from the BGH – AustralianSuper Consortium as well as from Brookfield.
You may remember that Brookfield offered $2.50 per share for Healthscope, beating the $2.36 per share proposal by BGH – AustralianSuper. The share price now sits at $2.21, less than what two competing bidders and Healthscope management think the business is worth.
This fall is despite Healthscope saying that it is looking into the idea of selling its properties, which would likely fetch more than the $1.3 billion book value, and then leasing those properties back to Healthscope.
It could be a good move because Healthscope would then have substantial funds to finish the Northern Beaches Hospital as well as other construction and expansion projects.
According to AFR Street Talk, there have been at least three different attempts by three different Chinese entities to acquire a stake in Healthscope before it hit the boards in 2014.
Apparently those bidders were willing to pay a good price but the Foreign Investment Review Board (FIRB) didn't approve (nor deny) the bids.
Readers may remember that Pulse Health used to be the ASX's third largest private hospital operator before it was acquired by Chinese owned private hospital operator Healthe Care.
Will another big come in for Healthscope? Who knows? The problem for Healthscope now is that it faces difficult trading conditions. Indeed, it has announced it is closing two of its hospitals. This is despite ageing tailwinds playing a factor now and into the future.
The company also guided that hospital operating earnings before interest, tax, depreciation and amortisation (EBITDA) would fall again in the full-year result.
A bidder would be less inclined to pay a high price if the business isn't earning as much.
Foolish takeaway
Healthscope is currently trading at around 21x FY19's estimated earnings. Considering Ramsay Health Care Limited (ASX: RHC) is trading at around 18x FY19's estimated earnings I'd say Ramsay is the better pick. A lot is riding on the Northern Beaches Hospital working out for Healthscope.
