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- The ACCC is seeking an urgent injunction to stop Virtus Health’s (VRT) acquisition of Adora Fertility from Healius (HLS)
- In August, Virtus said it would acquire Adora — another leading provider of IVF services — along with three day hospitals for $45 million
- The ACCC is undertaking a public review of the transaction, but Virtus said it would go ahead regardless of whether the review has been completed
- Concerns raised by the ACCC include a significantly increased market share for Virtus, which could lead to decreased competition and an increase in IVF prices
- Shares in Virtus Health were up 0.73 per cent to $5.49, while Healius was up 1.08 per cent to $4.70 at the close of trading on Wednesday
The ACCC has taken “a significant step” as it seeks an urgent injunction to stop Virtus Health’s (VRT) proposed acquisition of Adora Fertility from fellow ASX-lister Healius (HLS).
Both Virtus and Adora are leading providers of IVF services, and both companies operate fertility clinics in Brisbane, Sydney and Melbourne.
On August 30, Virtus notified the Australian Competition and Consumer Commission (ACCC) of its intention to acquire Adora, along with three day hospitals, from Healius for $45 million — a notice the ACCC said “provided very limited information”.
The ACCC subsequently launched a public review of the transaction on September 21, having previously told Virtus that it was not able to grant early merger clearance.
Last week, however, the companies advised the ACCC “of the imperatives necessitating prompt completion of the acquisition,” and said they would aim to complete the transaction this Friday, October 15, despite the fact the ACCC’s review will not be completed.
“It is extremely disappointing to see parties moving to complete an acquisition involving competing businesses such as this while knowing there has been inadequate time for appropriate regulatory scrutiny,” ACCC Chair Rod Sims said.
“By proceeding with the transaction while the ACCC is in the very early stages of a public review, the parties have shown complete disregard for the usual merger assessment processes in Australia.”
The acquisition, according to the ACCC, would increase Virtus’s already substantial market share in Brisbane and Melbourne, with further concerns raised over the changes to the market in Sydney.
In addition, the ACCC argues that Adora has been a “vigorous” competitor, pushing prices for IVF services lower through its low-cost model.
“A reduction in competition is likely to result in increased IVF prices, adding to the financial impact on consumers seeking to fulfil their wish for having children,” Mr Sims continued, noting that it was already an expensive and difficult process.
To circumvent that concern, Virtus had offered the ACCC a temporary “hold separate” proposal, meaning Virtus would acquire Adora but commit to keeping the business separate. But that was not accepted by the ACCC, which called it an “inferior option” that was unlikely to be effective in maintaining Adora as a “vigorous and effective competitor”.
“The ACCC considers that there are no compelling reasons other than commercial convenience for the transaction to proceed at this time,” Mr Sims said.
In a statement released today, Virtus said it remained committed to completing the acquisition and that it would defend any legal proceedings.
“Situations like this demonstrate why we believe Australia needs a formal merger regime, under which companies cannot complete transactions which raise potential competition issues before they allow adequate time for ACCC approval,” Mr Sims concluded.
Shares in Virtus Health were up 0.73 per cent to $5.49, while Healius was up 1.08 per cent to $4.70 at the close of trading on Wednesday.
