Tax Ruling Scuppers Australian Healthcare Aquisition

by Mary Swire, Tax-News.com, Hong Kong

28 November 2007

Healthscope, Australia's second largest healthcare provider, has been forced to shelve a proposed A$2.8 billion (US$2.45) deal to acquire parts of Symbion Health Ltd's business, following an adverse tax ruling by the Australian Taxation Office.

Symbion, a leading Australian health and diagnostic company listed on the Australian Stock Exchange, announced on November 27 that it was terminating the transaction after the ATO ruled that investors in the company would not be entitled to capital gains tax relief on Healthscope stock offered as part of the bid.

Under the proposed deal, Healthscope would have acquired Symbion's 270 medical and diagnostic centers for up to A$1.7 billion, while a consortium of private equity groups, including Ironbridge Capital and Archer Capital, would have bought Symbion's drug distribution and vitamin business for A$1.4 billion.

"We are very disappointed that the ATO has formed the view that Symbion Health cannot benefit from scrip for scrip roll-over relief in relation to the proposed diagnostics transaction," Symbion Health's Chairman, Paul McClintock, commented in a statement.

"Symbion Health had expected to receive all the regulatory approvals required to implement the proposed diagnostics transaction and the proposed C&P scheme and had received strong tax advice supporting the applications for the ATO rulings. Given the ATO's decision, Symbion Health shareholders will miss out on the opportunity to participate in the very substantial benefits which were expected from the diagnostics transaction," he added.

Healthscope confirmed on Tuesday that a condition precedent to the Transaction Implementation Deed (TID) between Healthscope and Symbion dated 8 October 2007 relating to a private tax ruling from the Australian Taxation Office "will not be able to be satisfied".

"As a result, the acquisition by Healthscope of Symbion's diagnostics businesses in the manner contemplated by the TID will not proceed, and Healthscope and Symbion have terminated the TID with immediate effect. As contemplated by the TID, certain rights of the parties (including certain rights to a break fee) survive termination of the TID," a company statement explained.

Symbion and Healthscope also revealed that transaction meetings scheduled for Friday, November 30 have been cancelled.

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