Australian Clinic Operator Spurns Chinese Suitor

Medical center operator Healius Ltd. has rejected a $1.2 billion buyout offer from Chinese real estate company Jangho Group, citing regulatory uncertainty and an offer price that undervalued the company.

Healius’ rejection comes just days after it received the original offer, and against a broader backdrop of higher scrutiny by Western governments concerned about threats to their national security such deals could pose. Jangho, which already owns about 16% of Healius, had previously offered AU$3.25 ($2.32) per share to buy the Australian company’s remaining shares it didn’t already own.

The deal would have valued Healius at about AU$2 billion, meaning the cost to buy out the rest of the company it didn’t already own would have been about AU$1.68 billion to Jangho. Shares of Healius, until recently known as Primary Health Care, fell 6.2% to AU$2.58 on Monday after the company said it would reject the deal.

“Having given careful consideration to the proposal, the board of Healius unanimously believes that the proposal is opportunistic and fundamentally undervalues Healius,” the company said in a statement to the Australian Securities Exchange. “Consequently the board does not support the proposal and does not intend to pursue it further.”

In addition to undervaluing the company, Healius also cited uncertainty surrounding funding for such a deal, as well as regulatory approval, as factors behind its decision.

“(T)he sources of the funding are not apparent from the information provided by Jangho and the proposal is conditional on a number of regulatory approvals that are outside the control of Jangho, including the approval of Chinese and Australian regulators. The status of these approvals is unknown,” Healius said.

The deal comes as Australian tightens scrutiny over Chinese investment. In November, Hong Kong-based CK Group’s AU$13 billion bid for Australian gas pipeline operator APA Group was blocked by the government on national security grounds.

Australia has also become one of a growing group of countries that has banned the use of Chinese networking equipment in its 5G networks over similar national security concerns. Countries including the U.S., Australia and New Zealand believe such equipment could be used for spying due to potential connections between Beijing and manufacturers like Huawei, even though Huawei has denied such ties.

Contact reporter Yang Ge (geyang@caixin.com)