Vital Healthcare management fees up for review, new action at Healthscope

Vital Healthcare Property Trust’s manager, NorthWest Healthcare Properties Management Ltd, said on Friday it planned to review its management fees in the first quarter of 2019.

Northwest & its ultimate shareholder, NWI Healthcare Properties LP, are controlled by Paul Dalla Lana of Toronto. Northwest also holds 24% of Vital’s units.

Another arm of the group, NorthWest Healthcare Properties REIT, increased the stake it bought in May in ASX-listed hospital owner Healthscope Ltd, as the takeover & breakup of Healthscope looked more certain.

On the management fees, Northwest committed not to exercise certain rights set out in Vital’s trust deed for the duration of the fee review, with a 31 March end date, including:

  • Their rights relating to the removal of independent directors, and
  • Their right to increase Northwest’s fees above current levels.

Vital chief executive David Carr, who’s also a management company director, said in yesterday’s release the full board would lead the fee review, with input to be sought from a range of unitholders.

“The decision to undertake a fee review follows positive & constructive discussions with a number of unitholders during the course of this year. The review will be conducted in the context of Vital’s existing structure as an externally managed listed trust, and its strategic & operational requirements.

“There can be no assurance of any changes to Vital’s fee structure or the nature of any such changes arising out of the review process.”

Vital will hold its annual meeting on Thursday 20 December.

The Healthscope scenario

In separate action this week, NorthWest Healthcare Properties REIT, of Canada, increased its stake in Australian listed hospital operator & takeover target Healthscope from 10% to 11.1%.

Healthscope, which owns 43 private hospitals in Australia (down from 45 when Northwest bought in) and pathology operations in New Zealand, has been a takeover target for months, after its sell-off of $A300 million of assets & 19% drop in net profit to $A89 million for the year to June.

This week Healthscope turned down a quest for due diligence from private equity firm BGH Capital Pty Ltd, heading a consortium comprising industry fund AustralianSuper, Carob Investment Pte Ltd of Singapore & 2 Canadian super funds, the Canada Pension Plan Investment Board & Ontario Teachers’ Pension Plan Board. Instead, Healthscope granted exclusive due diligence to Brookfield Capital Partners Ltd of Toronto, making its second bid.

The BGH proposal is worth $A4.1 billion at an indicative $A2.36 cash/share. Brookfield made a bid in August at $A2.50/share and raised it this week to total value of $A2.585/share. Norges Bank built a 5.1% stake in Healthscope over the last 3 months in a range of $A1.79-2.38/share.

Mr Dalla Lana said Northwest & the Vital trust were interested in jointly acquiring Healthscope’s underlying hospital-related real estate, in line with their long-term strategy to invest in healthcare real estate assets in Australia & New Zealand, and with scope to introduce other capital partners.

Through all the takeover activity, Healthscope has Brookfield’s agreement for it to continue working on establishing an unlisted property trust to hold most of its hospital assets and lease them back to Healthscope, provided it doesn’t enter a binding divestment agreement in the meantime. Healthscope added that “a new co-investor (unnamed) would be introduced to hold an interest of 49%” in the new trust.

Earlier story:
23  November 2018: Northwest increases Healthscope stake to 11.1%
9 May 2018: Vital Healthcare’s parent makes new Australian investment

Attribution: Northwest, Vital & Healthscope releases.

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