ACLs proposed acquisition of Healius raises concerns

The Australian Competition and Consumer Commission (ACCC) has raised significant concerns regarding the proposed acquisition of Healius Limited (ASX: HLS) by Australian Clinical Labs Limited (ASX: ACL) in a Statement of Issues. According to the ACCC, the acquisition could substantially lessen competition in the Australian pathology services markets.

Both ACL and Healius are providers of pathology services to the community, private and public hospitals, and veterinary clinics. They are direct competitors and operate under well-known brands. The proposed acquisition would combine two of the top three providers of pathology services in Australia, leading to increased market concentration.

The combined entity would become the largest provider of community pathology services in every state and territory where they both operate, owning over 50% of approved collection centers across the country.

The ACCC's concerns stem from the potential adverse impact on patients, including reduced levels of bulk billing, higher co-payments for privately billed services, collection center closures, less frequent collection of samples, or longer turnaround times. Patients might not immediately notice the effects on competition, especially when services are bulk billed. However, the extent of bulk billing offered by providers is one of the ways they compete.

There are also concerns about the acquisition's impact on public hospital pathology services in Victoria, where ACL and Healius are two of only three private providers of such services. The ACCC is worried that the combined entity may have the ability to increase prices or reduce service quality in bids for public hospital tenders, particularly affecting Victoria.

Furthermore, the acquisition could lead to a substantial reduction in competition in veterinary pathology services in Victoria and South Australia. The consolidation of two significant competitors in these already concentrated markets is of concern to the ACCC.

The ACCC is inviting stakeholders to provide their submissions in response to the Statement of Issues by 10 August 2023. The regulatory body will consider these submissions before making a final decision on the proposed acquisition.

As of the information provided, the concerns outlined by the ACCC regarding the potential lessening of competition have likely led to uncertainty and caution among investors, which may explain the 5% decrease in the stock price. Investors may be closely monitoring the situation and waiting for further developments before making decisions related to these two companies' stocks.

Customer Notice:

Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.

Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com