BUPA Australia closes in on MBF

The board of mutual health insurer MBF Australia has recommended
acceptance of a A$2.41 billion ($2.1 billion) cash acquisition
offer from BUPA Australia, a unit of UK health insurer BUPA.
According to BUPA Australia (BUPA), the offer represented “a
significantly enhanced and final proposal” and followed an initial
undisclosed offer made in August 2007 to MBF, Australia’s largest
private insurer.

An acquisition of MBF by BUPA would represent an about-turn for
MBF, which had previously announced that it was planning to
demutualise and list on the Australian Securities Exchange.
However, describing BUPA’s offer as “compelling”, MBF’s CEO and MD,
Eric Dodd, noted that the board had estimated MBF’s post-listing
market capitalisation at A$1.8 billion. BUPA’s offer represented a
premium of 34 percent above the market capitalisation
estimate.

Strong rival

A merger of BUPA and MBF would create a company rivalling
Australia’s largest health insurer, government-owned Medibank
Private. Medibank, which is set to be privatised in due course, has
about 3 million members, representing a market share of about 30
percent. MBF has almost 2 million members and BUPA, which trades as
HBA and Mutual Community, more than 1 million members, making it
the second largest of about 40 health insurers in Australia. MBF
also offers life and travel insurance and financial planning
services through its ClearView Retirement Solutions unit.

MBF is strong in the states of Queensland, New South Wales and
Tasmania, while BUPA is strong in Victoria and South Australia,
said MBF’s chairman John Conde. “Together, the two businesses will
create a competitive private health insurer with a national
footprint, something that MBF has long aspired to achieve,” he
added.

The merger is subject to approval by eligible MBF contributors and
company members at a scheme meeting that is expected to be held
during the first half of 2008. The Australian Competition and
Consumer Commission has indicated that it will not oppose a merger.
If the merger goes ahead, the combined group will trade under the
MBF brand and be headed by Dodd as MD and by BUPA’s MD Richard
Bowden as his deputy. Conde would be chairman of the combined
group.