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Friday, January 11, 2019, 21:49
Takeover bid by Jangho rejected
By Karl Wilson
Friday, January 11, 2019, 21:49 By Karl Wilson

Jangho Group Chairman Liu Zaiwang speaks at a work meeting in its Beijing headquarters Oct 6-7, 2018. Xu Xingli (1st right), president of the Group, as well as directors of all functional systems of the headquarters and relevant industrial companies in Chinese mainland attended the meeting (PROVIDED TO CHINA DAILY).

Shanghai-listed Jangho Group has not given up on its A$2 billion ($1.42 billion) bid for Healius, one of Australia’s biggest health groups, after the latter’s board formally turned down the offer of an all-cash takeover on Jan 7.

In a statement the same day, Jangho said it was “disappointed” the Healius board had “so promptly dismissed an offer that represents compelling value for Healius shareholders”.

On Jan 3, Jangho – the single biggest shareholder in Healius with 15.9 percent of the company – offered to buy the shares it did not own for A$3.25 a share, which represented a 33 percent premium to Healius’ closing price of A$2.44 on Jan 2.

The Beijing-based company expressed its desire to meet with Healius’ board and management to explain why it is in the best interest of Healius shareholders to consider the proposal.

Chinese investors have really shifted their investment interests to Australia’s high-tech, high-quality health products and services sector in the last three years

Doug Ferguson

Head of Asia and international markets at KPMG Australia

The bid for Healius comes at a time when Chinese investors are jostling to acquire healthcare operators, not only in Australia butinternationally, to serve a growing demand for better doctors and services in China.

Chinese investment in Australia's healthcare sector surged from near zero in 2015 to A$5.5 billion in 2017, according to a report from KPMG and The University of Sydney Business School.

The 2018 report, Demystifying Chinese Investment in Australian Healthcare, said: “Investments in Australia made by entities from the People’s Republic of China through mergers and acquisitions and joint ventures in calendar years 2015 to 2017, found that investment has been concentrated in the health supplement and medical treatment sectors in Australia”.

Healius, formally known as Primary Health Care, is one of the biggest owners of general practitioner clinics and pathology centers in Australia.

The company has been under pressure over the past year with its share price dropping from around A$4 in March to a low of A$2.19 just before the market closed for Christmas. Last August the company went back to the market in an equity raising of A$250 million.

With a background in construction supplies, Jangho is one of the world's biggest manufacturers of curtain walls. But it has been diversifying into healthcare in recent years.

In July 2015, it bought a 19.9 percent stake in the Australian Securities Exchange-listed Vision Eye Institute from Healius (then Primary Health), and then bought the entire eyecare group a month later.

It is also the fourth-largest investor in Monash IVF, which runs some of Australia’s most established fertility programs, with a 4.5 percent stake.

Listed on the Shanghai Stock Exchange, it has a market capitalization of $1.8 billion, according to Bloomberg.

Healius operates about 2,400 pathology centers, 70 medical centers and is partnered with about 1,500 general practitioners, dentists and other healthcare specialists across Australia.

Chinese investment in Australia's healthcare sector now exceeds its investment in the US healthcare sector, according to Alice de Jonge, senior lecturer at Monash University’s Business School in Melbourne.

Alice de Jonge

Chinese investors in Australia's healthcare sector are predominately private companies and not State-owned enterprises, she told China Daily.

Many of the investors include hospitals, specialized healthcare providers, pharmaceutical companies, construction companies and private equity firms.

There have been no large investments in pharmaceuticals, biotechnology or aged care as China seeks to develop local expertise in these areas, according to de Jonge.

She said the main attractions for Chinese investors are “the digitization of healthcare services and technical capabilities; Australia’s management expertise in specialized healthcare services; a stable regulatory (including political) and economic environment in Australia, and our cultural diversity”.

De Jonge said Chinese investors are attracted by the export opportunities – including from Australia into China – arising from investments in Australia's healthcare supplements sector and healthcare service delivery sector. 

“These opportunities are enhanced by (Australian) government initiatives such as the Medical Research and Innovation Strategy and the National Innovation and Science Agenda. Also, by the international free trade agreements to which Australia is party,” de Jonge said.

Hans Hendrischke, professor of Chinese business and management at the University of Sydney Business School, told China Daily that in regard to mature business services and technology, Australia is ranked first by Chinese among English-speaking countries, ahead of Canada, the United Kingdom and the United States.

Hans Hendrischke

“Rather than general health services, many Chinese companies seek to invest in specialist services, such as oncology, radiology, ophthalmology, IVF and aged care,” said Hendrischke, who co-authored the KPMG report.

“These services are replicable in the Chinese market and customized to fit the specific needs of China’s middle-to-high end consumer markets. Australian healthcare brands have an initial advantage in China due to their reputation for high-quality products with consumers.”

Doug Ferguson, head of Asia and international markets at KPMG Australia, said Australia’s success in attracting investment is due to Chinese companies seeking the “complete Australia package".

"Chinese investors have really shifted their investment interests to Australia’s high-tech, high-quality health products and services sector in the last three years,” he said at the time of the report’s release.

“Australia presents a range of country-specific advantages that include advanced technology application, quality care facilities, strong management systems and the 'clean, green and healthy' image for Aussie-branded exports back to China.

“As China’s aged care industry develops and its medical treatment sector matures, there will be a greater need for these qualities and more demand for the businesses providing them. There’s still a long way to go," Ferguson said.

karlwilson@chinadailyapac.com

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