29 Jul 2014

Acurity shouldn't be listed - Stewart

8:27 am on 29 July 2014

Businessman Mark Stewart says the high cost of earthquake strengthening is one reason why Acurity should no longer be a listed company.

Mr Stewart said a $50 million bill for strengthening Wellington's Wakefield Hospital to meet the earthquake code was one reason it was no longer appropriate for Acurity to be a listed company.

Mr Stewart, the Royston Hospital Trust Board and Sydney-based Evolution Healthcare have launched a takeover bid for the 29 percent of the company they don't already own, valuing Acurity at more than $112 million.

The offer price of $6.50 a share represents a 24 percent premium to Friday's close on the NZX at $5.25, but the shares rose to $6.58 on Monday, suggesting shareholders will demand more.

Acurity owns the Wakefield and Bowen hospitals in Wellington, the Royston Hospital in Hastings, 60 percent of the Grace Hospital in Tauranga and has a 30 percent stake in specialised medical facilities in Epsom, Auckland.

Mr Stewart, who first bought into Acurity in 2008, says he and his co-investors haven't fully decided the direction they'll take the company in, should their takeover succeed.

He said Wakefield Hospital, which is the flagship hospital of the company, would probably have to be rebuilt.

"We have a lot of people working there - surgeons, consultants etc - and we need to discuss with them exactly what sort of medical requirements the building would require for the future, let alone plan what could be coming up in medical advancement areas.

"So there's likely to be some reconfiguration in due course."

In the meantime, he said it was business as usual.

"In the normal course of business we would be discussing these things anyway, whether it's listed or unlisted."

Although he said there was a lot of money made by doctors and insurers, rather than investors - ultimately there was a place for private healthcare in New Zealand, because the government systems would not cope.

Mr Stewart said it was a long game and the sector was thriving, despite meagre returns in the past few years.

Risks in short term - analyst

Back in May, Forsyth Barr analyst Rob Mercer valued Acurity shares at $5.40.

He said patience was needed by investors.

"We've looked at the Wellington market being in excess supply, and therefore it's got to be some time before we get a return to more normal levels of profitability, reflecting a sector that should grow above GDP growth rates over the long term."

Mr Mercer said better performance of the public health system, with waiting lists meant fewer people were using private health insurance.

He said $6.50 was a healthy starting point for shares, given the headwinds likely in the short term.