Primary Health Care chief executive Peter Gregg says he will approach China’s Jangho Group, which has seized an 11 per cent stake in the company, to gauge its intentions amid speculation that a takeover bid looms.
On Thursday night Jangho emerged with its stake in Primary Health Care – the listed pathology, diagnostic imaging and medical centre group – which has been linked for some time to increasingly fervent takeover rumblings.
Mr Gregg wrote to his staff on Friday saying that Jangho’s intentions were unclear, but “considering media speculation around Primary as a takeover target, we will discuss such matters with Jangho”.
“Regardless of any investors’ intentions in our company, we are confident in the future success of Primary. What this recent development indicates is the strength of the business, our healthcare practitioners who contribute every day to the company’s success, and the supportive industry dynamics in healthcare,” he told the staff.
“We will keep you updated of any further material developments but in the meantime it is business as usual and our focus remains on delivering the excellent standard of care our patients have come to expect.”
Background in construction
In that deal Shanghai-listed Jangho bought its cornerstone 19.99 per cent stake in Vision Eye from Primary Health Care.
Jangho, which has its background in construction, said at the time of the Vision Eye takeover that “despite not currently being in the healthcare industry, Jangho is looking to diversify into healthcare as it believes there are significant opportunities to further develop the Australian and Chinese healthcare industry”.
China’s healthcare sector is evolving rapidly and as the country gets wealthier healthcare spending is set to increase.
The country does not currently have a general practitioner model, with patients presenting at hospitals with their illnesses rather than going to a GP.
As a large provider of GP services in Australia, Primary would be a logical partner for Jangho to gain expertise from in a well-respected healthcare market. That expertise could then be used to build a domestic business in China, which still has a lot of medical tourism.
Primary has been under significant pressure in the past year.
Core businesses vulnerable to cuts
Its core businesses are all regarded as being vulnerable to further cuts from a swath of federal government reviews.
Shares in Primary Health Care slumped to a low of $2.16 in February and short sellers, who profit when share prices fall, were targeting the company.
However, the stock has rebounded more than 70 per cent from its lows and the interest from Jangho has reignited the share price.
Primary shares were down 1.84 per cent to $3.67 late on Friday, giving the group a market value of about $2 billion.
Jangho is understood to have been on the share register for some time.