Symbion Health said on Tuesday that a planned A$2.8 billion (US$2.4 billion) takeover led by Healthscope would not proceed after Australian tax authorities disallowed tax relief on parts of the deal.
Symbion also reiterated its rejection of a rival A$4.10 a share bid by Primary Health Care, indicating any bid would have to be above A$4.50 a share, prolonging a fierce battle for lucrative assets in Australia's healthcare sector.
Symbion shares dropped 2.7 percent to trade at A$3.97 in morning trade, while Healthscope was up 2 percent at A$5.54. Primary was up 1.15 percent at A$12.29.
Symbion said the Australian Taxation Office had ruled that it could not benefit from capital gains tax roll-over relief in the part of the transaction that covers the Symbion assets that Healthscope would buy.
Other Symbion assets were to have been sold to private equity firms under the deal.
A favorable ruling on the tax position was a key condition for the success of the deal, the second attempt by the two to combine after Primary used its position as Symbion's largest shareholder to block an initial bid by Healthscope in September.
The failure of the bid is the latest twist in a year-long battle for pathology and diagnostic imaging assets in Australia, coveted as Australians age and increasingly rely on private healthcare.
Symbion reiterated its rejection of Primary's hostile cash bid that values Symbion at A$2.7 billion. Symbion Chairman Paul McClintock said in a statement the bid was inadequate and highly conditional.
"Based on our analysis and the synergies that Primary has said it expects to achieve, an acquisition of Symbion Health by Primary is likely to be significantly earnings per share accretive for Primary at a price well above A$4.50 per Symbion share," McClintock said.