Mbf To Put Merger Deal To Policyholders

Sydney Morning Herald

Saturday February 9, 2008

Danny John

BUPA AUSTRALIA'S five-year plan to overtake Medibank Private and become the dominant player in private health insurance entered its final stages yesterday after its would-be partner MBF agreed to put a $2.41 billion merger deal to its 800,000 policyholders.

A large majority are expected to support the merger at the vote in May after a campaign weighted heavily in favour of the move.

With the recent turmoil in the stockmarket adding to the uncertainty of MBF's one-time hopes of floating on the ASX, its policyholders are thought likely to prefer to take BUPA's cash than risk becoming shareholders in a listed company.

MBF's board has committed itself to supporting the merger and further backing has come from its governing council. The representative body made up of directors and policyholders yesterday agreed to change its constitution to allow the merger vote to go ahead.

Policyholders will be asked to shed the Sydney-based insurer's mutual status and accept individual cash payments based on their length of membership and the type of policy they have. Details about the vote and individual entitlements will be sent to policyholders in April.

MBF's chairman, John Conde, said the decision to accept BUPA's sweetened bid - which was increased by $600 million in December after the rejection by MBF of an earlier $1.8 billion approach - offered greater certainty than its own proposal to list on the stockmarket.

"Bringing MBF and BUPA Australia together will result in strong and trusted insurance brands operating in each state, achieving our long-held goal of becoming a truly national participant in the private health insurance industry," he said.

The two insurers have long sought to challenge Medibank Private's market leadership but, in doing so, opted for different paths over the past few years. BUPA, an offshoot of a British health group that operates the HBA and Mutual Community brands in NSW and Victoria, revealed yesterday that it had been holding sporadic talks with MBF since at least 2002 about merging their businesses to take on Medibank Private. However, MBF, which has expanded from its NSW heartland into other states, had made it increasingly clear that becoming a stockmarket-listed company, and using a mixture of shares and additional capital to acquire competitors, was its preferred route for expansion.

But that all changed when BUPA finally made MBF an offer that it agreed was too good to refuse.

Bringing the two together will create an insurer covering about 3 million Australians, with the merged entity on a par with the Federal Government-owned Medibank Private.

"This merger is by far the best option for industry consolidation we can foresee and will provide future customer benefits," BUPA's managing director, Richard Bowden, said.

© 2008 Sydney Morning Herald

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