Why BGH and CapVest are fighting over the IVF firm

On that basis both bidders might have a bit more in the tank.

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The battle for Virtus isn’t the biggest game in town but it’s one of the most interesting as each has used their arsenal to elbow their way into the lead.

The bidders, CapVest and BGH, have been to the Takeovers Panel three times to seek tactical adjudications, the ASX has been questioned on its decision to allow Virtus to move to a trading halt, and the tax treatment of payment has become an issue.

The shareholders are in clover – watching the slugfest between the bidders has meant a 63 per cent gain in the share price to $8.20 and pushed the company’s market capitalization to $700 million.

While on Monday CapVest poked its nose ahead in the race for Virtus after upping its offer to $8.10 cash (against BGH’s $8 offer) and dealing with the thorny tax treatment for those accepting its offer, BGH can still claim a consolation prize if it leaves the race. It has a stake of just under 20 per cent of Virtus which it acquired in December for $7.10 before launching its bid.

Tactically buying this stake put BGH in a strong position – and all but knocked out CapVest’s chances of successfully undertaking a bid via a scheme of arrangement. A scheme requires 75 per cent approval of shares which will be difficult to achieve when a near 20 per cent shareholder is likely to become a blocking stake.

Last week BGH planned to soak up some additional stock on market but was thwarted when Virtus shares were put into a trading halt on the back of an expectation that CapVest would improve its takeover proposal. BGH reckons the trading halt was a tactical exercise on behalf of Virtus and ASX should not have allowed its trading halt process to be gamed in this manner.

Meanwhile, the advantage gained by BGH’s 20 per cent stake appears to have been offset by what appears to be a strong preference by the Virtus board for CapVest.

The UK-based CapVest has been given access to due diligence, whereas BGH has been consistently denied that request. Indeed the latest offer from CapVest – which the board is recommending to shareholders – is conditional on Virtus NOT offering due diligence to BGH unless it comes up with a superior offer.

Given this bidding process is still live it does appear strange that Virtus has not given BGH the opportunity to access the books which may provide it sufficient comfort to up its offer again.

We don’t yet know whether BGH will stay in the race. Shareholders, including a bunch of doctors that own 9 per cent of the stock, will certainly hope it does.

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