Apax sets precedent with hostile bid for Swedish healthcare group

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The Independent Online

The private equity houses Apax Partners and Nordic Capital took the highly unusual step yesterday of launching a hostile takeover bid, offering Skr15.6bn (£1.1bn) for the Swedish healthcare group Capio.

The bid values the company at Skr153 a share, a 25 per cent premium to Thursday's closing price.

Capio rejected the bid immediately and confirmed that an informal offer had also been received in writing on 28 August. In a statement, the company said: "The board is surprised that Opica [the bid vehicle] has proceeded with its unsolicited offer in light of the earlier rejection and confirms that it unanimously rejects the offer."

Krister Hertzen, a member of the board of Capio, said: "We have no reason to regard Apax and Nordic as our enemy but we have not asked for this bid. The bidders have not asked to see our books, we feel that they are rushing into this and do not see what they are gaining in doing so. I have no idea why we have been approached in such a different manner to their usual method."

A spokesman for Apax declined to comment on the nature of the offer, but a source close to the bid said Apax was offering a "very full price" for Capio - about a 30 per cent premium to the price Apax paid for General Healthcare in March.

The bid values the company at 19.3 times free cash flow, a measure often used in hospital deals because of the very high levels of capital expenditure. The source added that Capio shareholders had done nothing to discourage Apax and Nordic from making the bid.

Even so, the Capio bid is a new departure for Apax after a frustrating period for the firm. Since January, Apax, either alone or as part of a consortium, has failed to win a number of public-to-private deals, including offers for ITV, House of Fraser, Signet and Mitchells & Butlers.

Apax has also acquired a reputation for walking away from "done" deals after suddenly dropping plans to buy Woolworths and Somerfield last year.

Hostile bids by private equity groups are extremely rare. They are often prohibited by the contracts of many private equity investors - so-called "limited partners" - because of the bad feeling that can develop.

Most private equity buy-outs follow lengthy periods of due diligence and are heavily reliant on the goodwill of senior management at the target company. One partner in a private equity firm said: "The industry has raised huge sums in the last couple of years, with $265bn (£139bn) raised in 2005 alone, and unless these funds are spent there is little chance that investors will come back for more.

"With friendly offers failing, the industry may be inclined to become more aggressive with its targets. This could be the first of a wave of hostile bids."

Capio operates more than 1,200 hospitals and health centres in Europe. On Thursday, the group confirmed it was in talks to acquire the French healthcare provider Tonkin Group.

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