ACL Take Over Proposal Wishful Thinking

History is the best indicator of the future.

ACL current management team was presiding over a loss making / break-even business pre Covid pandemic.

Covid changed everything and benefited all pathology players beyond their wildest dreams.

Covid is now largely done and in turn pathology players will need to grind it out with EBITDA margins in the low tenth (pre AASB 16).

Covid yielded circa 60% net contribution based on most estimates by comparison. That is, you can't go wrong during this period.

It will realistically take another 6-12 months for the full normalisation of covid and the real picture of each company's underlying picture to be transparent. That is 1H 2024 results.

Full year 2023 financials likely will be subject to significant accounting trickery with each company having conflicting interests to maximise their position.

It is likely and assumed correctly from the position of ACL that Healius FY23 full results will be lower than expectation given the significant cost reduction programme they are undertaking. In turn will disappoint market and lower share price post announcement. This is most likely a correct bet by ACL but is in no way indicative of ongoing margins enhancement expected from Healius moving forward.

ACL appears to have transitioned out of Covid quicker than Healius so far, in saying that Healius is a far bigger company.

At this point in time relatively ACL is on a high compared to Healius, another way of looking at it is ACL is overvalued and Healius is under valued in my opinion.

To put forward a nil premium takeover all script offer is been more than cute.

The premise appears to be centered mostly on ACL management been far more competent than current Healius management. This is clearly too early to tell with covid impacts still washing through.

Additionally, combined entity synergies to be realised over 4 years in a high interest rate environment (highly unlikely Crescent Capital will stay on for that long), one has to take a significant discount factor to the supposed upside numbers portrayed today. This is assuming ACCC gives 100% green light without any carved outs which is likely given the market share concentration of any combined entity on a state by state level.

In the absence of significant improvements in ACL's offer, this nil premium speculator does not warrant too much consideration in my opinion.

Short term however, will be very good for Healius shareholders as prices will keep rising for abit!