Mbf Looks A Swell Deal As Insurance Sector Rationalises

The Age

Friday July 6, 2007

Danny John

AUSTRALIA'S No. 2 private health insurance fund, MBF, is mulling takeover bids of about $2 billion from a rival and several private equity firms as rationalisation of the industry gathers pace.

BUPA Australia, the local arm of the British private health insurer, is believed to have tabled an offer in the past few days as part of a plan to challenge the dominance of the Commonwealth-owned Medibank Private, the industry's No. 1 operator.

Sources say a condition of the deal is believed to be that MBF continue with its previous plans to demutualise and offer shares to its members to make it easier for BUPA to acquire it.

It has also been suggested that MBF chief executive Eric Dodd, a strong proponent of the insurer's plan to list on the sharemarket, would have to stand aside in favour of a BUPA-nominated candidate to lead the merged group. A BUPA spokesman refused to comment yesterday.

BUPA Australia, which operates under its HBA and Mutual Community brands, has a 10 per cent share of the private health market. BUPA acquired the business from global general insurer AXA in 2003 and has since been looking to expand out of its South Australian and Victorian strongholds.

Support for a bid is likely to come from its British parent, which is cashed up to the tune of $3.5 billion after selling last month its portfolio of 26 private hospitals in Britain.

But BUPA, which ranks as the No. 3 private health insurer in Australia with about 1 million members, is facing competition from several private equity firms, among which it is believed US giant Kohlberg Kravis Roberts and local firm Pacific Equity Partners figure.

In a statement released last night, MBF confirmed it had received approaches from one "industry participant" and several private equity firms. The insurer did not name the companies involved.

MBF, which provides cover to nearly 2 million people, said its preferred option was still to demutualise and then to list on the ASX as part of its intention to grow and diversify. It last year made a profit of $181 million.

"However, the board has received approaches from other parties and, in the interests of members, believes that these approaches need to be considered," its statement said. It refused to make any other information public because of the confidentiality agreements it had entered into.

The offers for MBF come as the sixth-biggest insurer, NSW-based NIB, prepares to put its own plan to demutualise to its 320,000 members in a fortnight's time.

NIB's members will vote on July 19 on whether to take shares in a new company that will then seek an ASX listing. The group's management has made no secret of its intention to use its public status to merge with and acquire other health insurers to challenge the positions of the market leaders.

As for MBF, it has been considering a sharemarket float for at least four years, and accelerated its plans when the Federal Government announced its intention to sell the much bigger Medibank Private. However, Canberra subsequently pulled a proposal for a trade sale and then late last year announced that any float of Medibank Private would have to wait until after the coming federal election.

© 2007 The Age

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