‘MO-MAN’ POCKETS A STEELY COOL $700M

AND so it ends. The ‘man with the moustache’ has given up on his ambitious, aggressive and decidedly innovative attempt to seize control of Healthscope – and one of Australia’s largest operators of private hospitals will pass into foreign ownership.

The coming sale of Healthscope is both a triumph of – decidedly dogged – good governance and indeed nerve-holding by the company’s chairman Paula Dwyer and her advisers at UBS and a depressing commentary on the continual shrinkage of diversified domestic equity investments.

Local institutions and retail shareholders will cash in their Healthscope shares at the best price they’ve seen in two years. But at the cost of losing another investment outside the bigbank, big-resources, bigproperty sectors that dominate our market.

Inevitably, irresistibly, this will lead to more and more equity investment outside Australia – a trend which is captured in the Future Fund, which has only $10 billion of its $154 billion in Australian equities.

The fact that Healthscope was trading considerably higher than its sale price less than three years ago is a comment both on the short-sighted nature of Australian investors – both retail and instos, but especially performancedriven instos – and the upside potential for new owner Brookfield.

It is also precisely what ‘mo-man’ – AusSuper’s Ian Silk – was trying to seize, along with his collection of investors from other super funds and private equity group BGH.

He and AusSuper – as the biggest player in this game with its existing 16 per cent stake in Healthscope – had three choices.

To stick on its 16 per cent and almost certainly vote down the scheme takeover proposed by Brookfield.

That would not have stopped Brookfield moving to 50 per cent and control of Healthscope.

But it would have deprived holders of the higher $2.50 (including dividend) that Brookfield as offering under the scheme (with its certainty of 100 per cent) and left them getting $2.40 under the default offer.

It would also have locked AusSuper into a Brookfieldcontrolled Healthscope which might have ended up being de-listed.

The second choice was a version of this: vote for the scheme and its $2.50 but take the payment in equity reinvested in Healthscope.

The third was to vote for the scheme and to take the cash.

‘Mo-man’ went for this – and now has $700 million looking for a new home.