However, its share price has been under pressure: two years ago it was trading over $4 a share, and on Friday it ended at just $2.76 each. It has struggled amid a raft of management changes, faced challenges hiring and retaining doctors in its medical centres, and clashed with staff over pay disputes in pathology.
But shareholders appear patient. Several top five investors told AFR Weekend the sagging share price was yet to reflect any of the transformation initiatives under way, like the revamping of tired medical centres and a technology overhaul for pathology.
Justin Hance, portfolio manager and director of international research at the Chicago-based asset manager Harris Associates, believes the Chinese must increase their offer to gain any traction with investors.
“If there was a credible offer, backed by financing, at a valuation that we thought acceptable, then we would advise the company to engage,” he says
‘They have done the right thing’
One long-time top five shareholder backed Hubbard’s rejection: “They have done the right thing and brought this into the public arena, which is where it needed to be.”
Hubbard, who was named chairman in July 2013 after the sudden departure of long-time chairman Rob Ferguson, and Liu planned to speak on Friday night – their first conversation since the rejection. The pair have been slowly building a rapport, but Liu speaks limited English and with several management changes since Jangho joined the register 2.5 years ago – it has been slow process.
They pair had previously met when Hubbard visited Liu at Jangho’s headquarters in China last year. Over the past 18 months Healius chief executive Malcolm Parmenter and chief financial officer Mal Ashcroft visited China to personally go over the half- and full-year results with Liu.
Those close to Liu say he is feeling “pretty miffed” about the lack of engagement, given Healius came to him with a week’s notice, asking Jangho to cornerstone last year’s $250 million capital raising. Healius requested a full letter of support at the time last August, which Liu complied with.
One source said the the swiftness of rejection, without consultation, has made Liu “feel like an outsider” and that the relationship is “a one-way street”.
Liu has shied away from the media, but through a seven-page statement from Jangho to the Hong Kong Exchange, he was talking tough: “Currently Healius’ stock price is at a historical low, the timing [for the bid] is better. The company intends to acquire Healius in the future to create a bigger and stronger corporate healthcare business.”
The billionaire made his fortune in China’s construction boom, but now needs to diversify and is aggressively building a business in healthcare – despite having no sector experience.
AFR Weekend can reveal that Macquarie-advised Jangho will bring in a strategic equity partner in the next few weeks to bolster its Healius bid.
One healthcare industry executive speculated that Jangho will ultimately be successful.
“I do think Liu will be successful,” he says. “This is a good strategic move as Liu would merge the Vision Eye business with Primary. He could sweat these assets big time. With Primary getting into day surgery, they would rip out millions of costs. It’s a good move, just a matter of getting this off the ground.”
‘Why get rid of one of your top billers?’
Several sources that know Liu say he is “a very determined guy”, softly spoken and charismatic.
He is certainly direct. In 2015 it took all of three days for him to express interest in person to purchase Vision Eye Institute, buy a 19.9 per cent stake off Primary and make an offer for the entire ophthalmology company. He was successful, making this deal his his first healthcare foray.
However, Vision Eye has had a rocky start under Jangho ownership. There has been several CEO changes and top doctors leaving or getting fired – although overall it is ahead, with about 50 ophthalmologists today compered with 40-odd three years ago.
Dr Paul Hughes sold his practice to Vision Eye in 2006 and continued to work there until December 31, 2017 – when Jangho decided to not renew his contract. Hughes had been a top biller, bringing in more than $2 million in earnings per annum at the Hurstville, Sydney clinic. He was the only full-time doctor out of the five who practised at the clinic. Jangho also terminated the director of nursing, Lois Scott, who had been there for 18 years. Scott says Vision told her she was no longer qualified for a new role, and she could take on another role with less pay, or take take a redundancy.
“What has become obvious after working there for 20 years is the patients that I attracted are gone,” Hughes says. “Why get rid of one of your top billers? Even other doctors said this to me.”
Hughes added Jangho – given its lack of experience in running healthcare assets – relied heavily on the advice of the doctors and the executives at Vision Eye.
Vision Eye CEO James Thiedeman contests Hughes’ version of events.
Thiedeman has been CEO for a little over a year. He says Jangho has been a supportive owner, and not involved in day-to-day decision making or influencing clinical behaviour.
“The focus of Vision has moved to not just about ophthalmology, but a range of specialist services in day surgeries,” adds Thiedeman, who is the former CEO of fertility specialist Monash IVF, in which Jangho last year bought a stake.
With Healius recently acquiring Montserrat Day Surgery – if the two companies were to merge – it would create one of the nation’s largest day surgery operators.
If Jangho were to buy Healius, Thiedeman says the group could extend Healius’ industry know how to China where there is a massive middle-class yearning for high-quality healthcare.
He says the self-made Liu came from an impoverished background and is a driven man. Liu comes to Australia every few months to check in on his investments.
“My experience with Mr Liu is he is down to earth and has an appreciation that healthcare is quite a different industry to building,” Thiedeman says. “He knows what he wants, and he understands that diversification of Jangho is crucial to its future for another 20 years.”