Ann: IDX: Letter to Shareholders regarding Capitol takeover offer, page-25

From the Aus..looks good to me.

Capitol Health boss Andrew Harrison is ready to play the long game in his hostile grab for Integral Diagnostics, as he argues his company has moved on from its previous failings integrating acquired assets.
His company made a surprising move on Integral Diagnostics late last month, in a deal valued at about $356 million, after previous talks between the two companies failed. The suitor said in its original pitch that the deal would create one of Australia’s leading providers of diagnostic imaging services through a combined network of clinics and hospital practices.
Mr Harrison said during the original talks both companies had agreed on the strategic merit and industrial logic of a transaction but could not agree on the future management and board, and the metrics.
He said despite the talks breaking down, his team and advisers still fundamentally believed in the economics and benefit of a deal.
“Our share price remains strong, so we thought a takeover proposal still had merit,” Mr Harrison said.
The cash-and-scrip deal values the target at $2.46 a share. The offer includes 6.9 Capitol shares and 36c cash for each Integral share.
Integral has told its shareholders to take no action on the unsolicited offer and has said it will respond with a formal recommendation once it receives the bidder’s statement, which is expected this week.
Capitol Health, chaired by former AFL boss Andrew Demetriou, has secured support for its bid from four funds invested in Integral, which together account for 19.55 per cent of Integral shares.
But it is understood that up to 30 per cent of Integral’s shareholders have already voiced opposition to the bid. Others have also questioned Capitol’s ability to integrate the two companies given it failed to successfully integrate NSW assets it purchased, forcing it to divest those businesses.
Mr Harrison noted the assertions made about Capitol’s history and its ability to integrate an acquired asset. He said his company had been on a wild ride, buying assets at the top of the market and then failing to successfully integrate them. He acknowledged that while he wasn’t running the company during that time, he was on its board and has to take some of the blame.
But he said since he took over the top job last October, he had driven his team to refocus and reduce its debt.
“We are in a different place, with an almost entirely different management team and we’re really focused on sensible acquisitions,” he said.
“The future of our business doesn’t rely on the Integral deal. It is growing independently of any proposed merger.”
Mr Harrison said the industry was ripe for consolidation and companies needed scale to be able to increase investment in technology, training and development.
He said merging the two businesses would not only result in upfront synergies of $5m but would also give a greater growth trajectory. “The merged entity would have a big balance sheet and it could be part of the ASX300. Together we will grow more rapidly in terms of profit than we would individually.”
The Capitol boss added that his company had already held discussions with doctors on both sides, saying they all raised similar concerns. He said the common question was, “can I run my clinic the way I have always run it?”
“We’re saying the doctor’s life doesn’t change, it in fact will likely get better,” Mr Harrison said.
He expected the bid to remain hostile but said “we want to take the best of both management teams and we want to build a much better business”.