IBA Health in the news
IBA Health announces offer for HCN shares
03 Nov 2004
Sydney, 3 November 2004 – IBA Health Limited (ASX:IBA) Australia’s largest e-health company following on from its recent push into global markets has acted swiftly to consolidate its growing position in the Australasian health sector by announcing a proposed merger with Health Communication Network Limited (“HCN”). The merger would be implemented by way of an off-market takeover bid for all of the ordinary shares of HCN.
IBA (or a wholly owned subsidiary) will offer 1.73 fully paid ordinary IBA shares for each HCN share. IBA’s offer values HCN at approximately $88.2 million, which is equivalent to $1.40 per HCN share1. The transaction will combine IBA’s strong market share in hospital information systems with HCN’s strong market share in GP and Specialist systems to create a global health IT
solutions provider with a presence across the entire Australian healthcare sector.
TRANSACTION HIGHLIGHTS
THE OFFER
• IBA will offer 1.73 fully paid ordinary IBA shares for each HCN share.
• IBA’s offer values HCN at $88.2 million, which is equivalent to $1.40 per HCN share1
– a premium of 17.6% to the one month volume weighted average price of HCN shares on the ASX.
THE COMBINATION OF IBA HEALTH AND HCN will:
• Create a leading provider of Health IT solutions in Australasia, covering solutions to Hospitals, GPs, diagnostic providers and Aged and Community Care with combined 2005 forecast revenues in excess of $68M.
• Provide an Australia-wide footprint for the delivery of business and clinical transactions across the health sector.
• Create an entity capable of being a leading partner with the Australian Government’s initiatives such as Health Connect.
• Provide an international channel for the combined group’s products and leverage off IBA’s existing international presence, including its recently announced alliance with Eastman Kodak.
• Provide an enhanced R&D capability to deliver systems to support improved patient care.
• Deliver significant cost savings and enhanced revenue opportunities.
• Be earnings per share accretive.
• Create a financially stronger company which would benefit both investors and customers alike.
_______________________________
1.Based on the volume weighted average price for IBA’s shares over the last 1 month.
WHY IBA CAN DELIVER GREATER VALUE FOR HCN SHAREHOLDERS:
• IBA is Australia’s largest e-health company with a market capitalisation of $161m1.
• IBA is an Australian company with a long track record of delivering quality IT solutions to a broad spectrum of healthcare providers and payers.
• IBA has a vision for Health IT and has a proven successful track record of implementing this vision and delivering value to its shareholders.
• IBA has attracted world class management with international experience in Health IT.
• IBA management has a track record of successfully acquiring and integrating strategic acquisitions in the health IT sector. IBA has made 3 acquisitions in the past 12 months.
• IBA has an existing direct channel and key strategic alliances in major international markets.
STRATEGIC RATIONALE FOR THE TRANSACTION
IBA believes that the combination of IBA and HCN will create significant value for the shareholders of both companies.
• IBA and HCN operate in complementary markets in the Australian health IT sector.
• IBA has a leading market share in providing IT systems for private hospitals and a growing share in the public hospital sector.
It has recently announced a global distribution agreement with Eastman Kodak where Kodak will market IBA’s leading hospital solutions with Kodak’s health imaging solutions. IBA also supplies systems to hospital pharmacies and more recently acquired a solution for laboratories. IBA provides solutions to the Australian aged and community care market and has a growing presence in integrated systems for primary care particularly for larger practices. Furthermore, IBA has the largest health-related transaction business in
Australia connecting doctors and other primary care providers with the Health Insurance Commission (“HIC”), the private health funds and financial institutions.
• HCN is Australia’s largest provider of clinical and administrative systems to the GP and Specialist markets. HCN provides an information service to the hospital sector nd recently has been implementing a radiology information system. The market shares of both companies are complementary and the overlap is minimal.
• The combination of IBA and HCN will facilitate significant opportunities to derive revenue from transactions and messaging between Australia’s 100,000 healthcare providers, private health funds, financial institutions and various government bodies.
• IBA’s existing international presence, either directly or via its alliance partners such as Eastman Kodak, will offer international sales opportunities for HCN’s products.
• The combined business will be uniquely placed to deliver solutions to meet the various State and Federal Government initiatives in relation to the creation of electronic health records and the delivery of better healthcare for Australians.
• The greater critical mass of the combined entity will be more relevant for investors. In addition, this critical mass will enhance the confidence of both companies’ customers that the combined entity can meet the increasingly complex and demanding requirements of health IT initiatives.
• The acquisition is expected to generate cost savings of approximately $2 million per annum as a result of the reduction of duplicated expenses and the rationalisation of R&D activities.
_______________________________
1 Based on the volume weighted average price for IBA’s shares over the last 1 month
Further details on both IBA and HCN and the reasons for the bid are outlined in Annexure A.
Note that the above comments assume that IBA acquires 100% of the shares in HCN. Should IBA not acquire 100% of HCN’s shares, some of the synergy benefits will not be obtained, although IBA is confident that many of those benefits will be realised provided IBA’s minimum acceptance condition of 50.1% is achieved.
BID CONDITIONS
IBA’s bid is subject to a number of conditions; including a 50.1% minimum acceptance condition and HCN not announcing any material change to its published earnings forecasts for FY2005. Full details of the bid conditions are set out in Annexure B.
INTEGRATION AND MANAGEMENT
The IBA management team has extensive experience in acquiring and integrating health IT businesses. The IBA team also has considerable international knowledge and experience in the Hospital, GP, Specialist and Diagnostic markets and is therefore in a position to best evaluate and capitalise on the combined business and significant opportunities in Australia and overseas.
For further information, please visit www.ibatech.com or contact:
Gary Cohen
Executive Chairman
IBA Health Limited
Tel: 02 8251 6700
Mobile: 0414 224 971
Email: gary.cohen@ibahealth.com
Annexure A
WHO IS IBA?
IBA Health is Australia’s largest e-health company and is listed on the Australian Stock Exchange with a market capitalisation of $161 million1.
IBA derives its income from two main sources:
1. eHealth Network - transactional revenue from the transmission of health related and financial information between healthcare providers, private health funds and Government bodies. IBA has over 5,000 healthcare sites using its solutions and all major private health funds and several Government bodies receiving transactions from IBA’s customers.
2. eHealth Solutions – the sale, installation and support of IT solutions to healthcare providers, including hospitals, pharmacies, laboratories, clinics, GP’s, aged and community care.
IBA’s market presence in Australia comprises:
• Being the leading provider to Australian private hospitals with 180 hospitals, representing a market share of over 60%. All major private hospitals groups, including Affinity Health, Ramsay Health Care, Healthscope, Sisters of Charity and Nova Health use IBA’s systems.
• As a growing provider to Australian public hospitals with 33 sites using IBA’s systems, including key metropolitan hospital reference sites in Melbourne.
• Over 5,000 primary care sites using IBA’s financial messaging solutions in Australia – linking with most private health funds and the HIC.
• Largest provider to the aged and community care market with over 300 sites.
• Over 900 GP and Specialist sites in Australia.
• IBA’s Electronic Health Record solution is currently being installed across 170 sites for the Australian Defence Forces.
In addition, IBA has operations and customers in New Zealand, South East Asia and the Middle East together with a strategic alliance with Eastman Kodak to market IBA’s products in other international markets, including USA, China and Europe.
WHO IS HCN?
HCN is an Australian focused provider of IT solutions to the GP and Specialist markets, with 6,500 practices using HCN’s clinical solutions and 3,500 practices using HCN’s practice management solutions. An estimated 85% of computerized GP’s use HCN’s solutions.
HCN also markets third party clinical reference content to Australian hospitals. 80% of large Australian public hospitals are clients of HCN for this content. HCN has an emerging business that delivers integrated solutions to diagnostic radiology practices.
THE MARKET OPPORTUNITY
HCN has a stated strategy of developing a transaction business based on its strong GP desktop position. IBA has an existing transaction business and a stated strategy of growing this business based on its strong hospital, primary care and aged care position. The
combination of IBA and HCN will materially enhance both companies’ ability to execute this common strategy.
This opportunity is being driven by initiatives of Federal and State Governments, private health funds and healthcare providers.
_______________________________
1 Based on the volume weighted average price for IBA’s shares over the last 1 month
There are two key requirements to execute this strategy:
1. A broad footprint of customers across the Australian healthcare sector – a requirement that is enhanced by the combination of IBA and HCN; and
2. An e-health transaction capability – a requirement satisfied by IBA’s existing transaction business and expertise.
IBA has an existing direct channel and key strategic alliances in major international markets. IBA believes that additional revenue opportunities can be realised by marketing HCN‘s existing product suite into IBA’s international channel
Annexure B
SUMMARY OF OFFER CONDITIONS
(a) Minimum acceptance Before the end of the Offer Period, IBA and its associates have relevant interests in at least 50.1% of the HCN Shares.
(b) No regulatory actions Between the Announcement Date and the end of the Offer Period (each inclusive):
(i) there is not in effect any preliminary or final decision, order or decree issued by a Public Authority; and
(ii) no application is made to any Public Authority (other than by IBA) or commenced by a Public Authority, in consequence of or in connection with the Offer (other than an application, decision or order made under, or relating to a breach of, Chapters 6, 6A, 6B or 6C of the Corporations Act or unacceptable circumstances for the purposes of the Corporations Act), which restrains or prohibits, or otherwise materially adversely impacts upon, the making of the Offer or the completion of any transaction contemplated by the Offer or which seeks to require the divestiture by IBA of any HCN Shares, or the divestiture of any material assets of the HCN Group or the IBA Group.
(c) IBA Share price Between the Announcement Date and the date of the Offer (inclusive), IBA Shares do not trade below $0.70 on ASX at any time on any ASX trading day.
(d) Regulatory approvals During the Offer Period, all Approvals as are necessary to:
(i) permit the Offer to be made to and accepted by HCN shareholders;
and
(ii) allow, following a successful completion of the Offer, the business of the HCN Group to continue to be conducted on substantially the
same terms as the business was conducted as at the date of the Bidder's Statement, are granted, given, made or obtained on an unconditional basis and remain in full force and effect in all respects and do not become subject to any notice, intimation or indication of intention to revoke, suspend, restrict, modify or not renew the same.
(e) No material adverse change
Save as publicly announced to ASX prior to the Announcement Date, between the nnouncement Date and the end of the Offer Period, none of the following events, hanges or conditions occur, are announced or become known to HCN (whether or not t becomes public):
(i) any change in the business, assets, liabilities, financial or trading osition, profitability or prospects, the status or terms of
arrangements entered into with any member of the HCN Group or the satus or terms of any Approvals which are applicable to any member o the HCN Group (whether or not wholly or partly attributable to the making of the Offer, and/or the acquisition of HCN Shares under the Offer), which has a material adverse effect on the assets, liabilities, financial or trading position, profitability, prospects or manner of conduct of any of the HCN Group’s businesses;
(ii) any event, action, proceeding, circumstance or change in circumstance which is reasonably likely to result in a material adverse
effect of the kind mentioned in paragraph (i) above; or
(iii) the introduction into the Parliament of the Commonwealth of Australia of or of any State or Territory of Australia of any law, the making of any regulation under any law, the adoption of a policy, or any official announcement on behalf of the government of the Commonwealth of Australia or any State or Territory of Australia or a Public Authority that such law or regulation will be introduced or policy adopted (as
the case may be) which will or is reasonably likely to have a material adverse effect on the assets, liabilities, financial or trading position,
profitability, prospects or manner of conduct of any business of any member of the HCN Group or which will or is reasonably likely to
result in the incurring of a material liability to the IBA Group or the HCN Group in implementing the transactions contemplated by the
Offer.
Without limiting the operation of this clause, any action described in (e)(i) to (ii) above in relation to the following events will be in breach of this clause:
(iv) HCN's cash flow is negative as disclosed in its Appendix 4C quarterly report for the quarter ending 31 December 2004; or
(v) before the end of the Offer Period, HCN revises its forecast profit after tax for the 2004/2005 financial year from $5,500,000 as publicly
announced to ASX on 10 August 2004, to less than $5,250,000, or otherwise makes any announcement in relation to a matter which
may have the effect of reducing that forecast profit to less than $5,250,000.
(f) No material acquisitions, disposals or changes in the conduct of business Between the Announcement Date and the end of the Offer Period, each of the HCN Group’s businesses are carried on in the usual and ordinary course, and no member of he HCN Group:
(i) enters into or announces an intention or proposal to enter into;
(ii) discloses (without having disclosed to ASX prior to the Announcement Date) the existence of; or
(iii) incurs, becomes subject to, or brings forward the time for performance of (or is reasonably likely to incur, become subject to or bring forward the time for performance of), any obligation or arrangement:
(iv) to acquire, dispose of or create an encumbrance in respect of or terminate or surrender any interest in any asset or business or any
interest therein;
(v) to perform or acquire the benefit of any services in relation to any asset or business or interest therein; or
(vi) to enter into, terminate, amend or waive any of the terms applicable to a joint venture, asset or profit sharing, partnership or joint selling agreement, merger of businesses or of corporate entities, lease, licence or grant of any right, which will result or is reasonably likely to result in a material change, following the Announcement Date (as compared with the position immediately prior to the
Announcement Date), in the assets, liabilities, financial or trading position, profitability, prospects or manner of conduct of any business of any member of the HCN Group, other than obligations or arrangements which have been publicly announced to ASX prior to the Announcement Date, and obligations or arrangements which are consistent with any such announcements. Without limiting the operation of this clause, any action described in (f)(i) to (vi) above in relation to the following transactions will be in breach
of this clause:
(A) the acquisition or disposal of one or more companies or assets (or any interest in companies or assets) for an aggregate amount greater than $5,000,000;
(B) any transaction involving a commitment, or the foregoing of revenue, of greater than $5,000,000;
(C) any transaction in which a member of the HCN Group gives any person (whether conditionally or unconditionally) the right to market, distribute, license the use of or use the Products or the Services or which limits or restricts the people who are able to market, distribute, license the use of or use the Products or the Services in any jurisdiction or market; or
(D) any transaction in which a member of the HCN Group obtains (whether conditionally or unconditionally) the right to market, distribute, license the use of or use any other person's products or services or which limits or restricts the products or services which HCN is able to market, distribute, license the use of or use in any jurisdiction or market.
(g) Prescribed Occurrences None of the occurrences specified in s652C of the Corporations Act happens either:
(i) between the Announcement Date and the time the Bidder’s Statement is given to HCN; or
(ii) between the time the Bidder’s Statement is given to HCN and the end of the Offer Period, other than the issue of HCN Shares as a result of exercise of the HCN Options.
Definitions
Announcement Date means 3 November 2004.
Approvals means all regulatory approvals, consents or waivers (other than those the absence of which would not have a material adverse effect on the assets or operations of the HCN Group, or the IBA Group) which are required by law or by any Public Authority.
ASX means Australian Stock Exchange Limited or, as the context requires, the financial market operated by it.
Bidder's Statement means the bidder's statement to be issued by IBA (or a wholly owned subsidiary) in relation to the Offer.
Corporations Act means the Corporations Act 2001 (Cth).
HCN means Health Communication Network Limited (ABN 76 068 458 515).
HCN Group means HCN and its subsidiaries.
HCN Options means the options to subscribe for HCN Shares issued under the HCN
Executive Option Scheme (the terms of which are set out in the document entitled 'The Terms and Conditions of Health Communication Network Limited Executive Option Scheme') and which are on issue as at the date set by IBA under section 633(2) of the Corporations Act in relation to the Offer.
HCN Shares means fully paid ordinary shares in HCN.
IBA means IBA Health Limited (ABN 66 063 539 702).
IBA Group means IBA and its subsidiaries.
IBA Shares means fully paid ordinary shares in IBA.
Offer means the off-market takeover bid constituted by each offer to be made by IBA (or a wholly owned subsidiary) for HCN Shares.
Offer Period means the period during which the Offer will remain open for acceptance.
Products means all the software, data and related products which any member of the HCN Group licenses to its customers including, without limitation, the clinical software, practice management software, electronic prescribing and electronic health management software, and the online content and applications for hospitals.
Public Authority means any government or any governmental, semi-governmental, statutory or judicial entity or authority, or any minister, department, office or delegate of any government, whether in Australia or elsewhere. It also includes any self-regulatory organisation established under statute and any stock exchange.
Services means all services which any member of the HCN Group provides to its customers including services provided in relation to the Products. will
• Create a leading provider of Health IT solutions in Australasia, covering solutions to Hospitals, GPs, diagnostic providers and Aged and Community Care with combined 2005 forecast revenues in excess of $68M.
• Provide an Australia-wide footprint for the delivery of business and clinical transactions across the health sector.
• Create an entity capable of being a leading partner with the Australian Government’s initiatives such as Health Connect.
• Provide an international channel for the combined group’s products and leverage off IBA’s existing international presence, including its recently announced alliance with Eastman Kodak.
• Provide an enhanced R&D capability to deliver systems to support improved patient care.
• Deliver significant cost savings and enhanced revenue opportunities.
• Be earnings per share accretive.
• Create a financially stronger company which would benefit both investors and customers alike.
_______________________________
1.Based on the volume weighted average price for IBA’s shares over the last 1 month.
WHY IBA CAN DELIVER GREATER VALUE FOR HCN SHAREHOLDERS:
• IBA is Australia’s largest e-health company with a market capitalisation of $161m1.
• IBA is an Australian company with a long track record of delivering quality IT solutions to a broad spectrum of healthcare providers and payers.
• IBA has a vision for Health IT and has a proven successful track record of implementing this vision and delivering value to its shareholders.
• IBA has attracted world class management with international experience in Health IT.
• IBA management has a track record of successfully acquiring and integrating strategic acquisitions in the health IT sector. IBA has made 3 acquisitions in the past 12 months.
• IBA has an existing direct channel and key strategic alliances in major international markets.
STRATEGIC RATIONALE FOR THE TRANSACTION
IBA believes that the combination of IBA and HCN will create significant value for the shareholders of both companies.
• IBA and HCN operate in complementary markets in the Australian health IT sector.
• IBA has a leading market share in providing IT systems for private hospitals and a growing share in the public hospital sector. It has recently announced a global distribution agreement with Eastman Kodak where Kodak will market IBA’s leading hospital solutions with Kodak’s health imaging solutions. IBA also supplies systems to hospital pharmacies and more recently acquired a solution for laboratories.
IBA provides solutions to the Australian aged and community care market and has a growing presence in integrated systems for primary care particularly for larger practices. Furthermore, IBA has the largest health-related transaction business in Australia connecting doctors and other primary care providers with the Health Insurance Commission (“HIC”), the private health funds and financial institutions.
• HCN is Australia’s largest provider of clinical and administrative systems to the GP and Specialist markets. HCN provides an information service to the hospital sector and recently has been implementing a radiology information system. The market shares of both companies are complementary and the overlap is minimal.
• The combination of IBA and HCN will facilitate significant opportunities to derive revenue from transactions and messaging between Australia’s 100,000 healthcare providers, private health funds, financial institutions and various government bodies.
• IBA’s existing international presence, either directly or via its alliance partners such as Eastman Kodak, will offer international sales opportunities for HCN’s products.
• The combined business will be uniquely placed to deliver solutions to meet the various State and Federal Government initiatives in relation to the creation of electronic health records and the delivery of better healthcare for Australians.
• The greater critical mass of the combined entity will be more relevant for investors. In addition, this critical mass will enhance the confidence of both companies’ customers that the combined entity can meet the increasingly complex and demanding requirements of health IT initiatives.
• The acquisition is expected to generate cost savings of approximately $2 million per annum as a result of the reduction of duplicated expenses and the rationalisation of R&D activities.
_______________________________
1 Based on the volume weighted average price for IBA’s shares over the last 1 month
Further details on both IBA and HCN and the reasons for the bid are outlined in Annexure A.
Note that the above comments assume that IBA acquires 100% of the shares in HCN. Should IBA not acquire 100% of HCN’s shares, some of the synergy benefits will not be obtained, although IBA is confident that many of those benefits will be realised provided IBA’s minimum acceptance condition of 50.1% is achieved.
For further information, please visit www.ibahealth.com or contact:
Gary Cohen
Executive Chairman
IBA Health Limited
Tel: 02 8251 6700
Mobile: 0414 224 971
Email: gary.cohen@ibahealth.com
