December 21, 2018 / 12:41 AM / 6 months ago

UPDATE 2-Healthscope extends exclusive talks with Brookfield, says rival suitor BGH still interested

* Talks extended until Jan. 18

* Shares soar as announcement gives confidence in an ultimate deal

* Rival BGH consortium still wants to conduct due diligence (Recasts, adds JPM analyst comment, updates shares)

By Paulina Duran

SYDNEY Dec 21 (Reuters) - Australia's Healthscope Ltd on Friday said it has extended exclusive takeover talks with suitor Brookfield Asset Management Inc by a month, and that a rival suitor remained interested, potentially re-igniting a bidding war.

The hospital operator has not yet committed to a binding A$4.5 billion ($3.2 billion) offer from the Canadian investment firm. Still, the extension sent its shares up as much as 6.55 percent as it gave investors confidence a deal would proceed.

"There was concern the bid could be reduced or withdrawn post due-diligence if Brookfield uncovered something disappointing, given the operating conditions for private hospitals have been challenging," said JPMorgan analyst David Low.

"But it's indicated at this stage, having done due diligence, that it expects to proceed, so there's a positive surprise in that."

Profit at Australia's second-biggest private hospital operator has been falling as the number of people buying private health cover has stalled. But the firm's hospital property portfolio has made it a target for suitors looking at the country's ageing population as a source of long-term income.

Brookfield's exclusivity period was due to expire on Friday. However, the firm still needs to finalise due diligence, debt financing and a binding implementation agreement, and so Healthscope agreed to extend exclusive talks until Jan. 18, the hospital operator said.

Brookfield told Healthscope it had "no reason to believe it would not be willing and able to proceed with the proposal for acquisition of all shares," the target firm said in a statement.

Healthscope stock was up 6.55 percent at A$2.19 in afternoon trade, versus a 1 percent decline in the broader market.

In a separate statement on Friday, Healthscope said rival bidder BGH Capital Pty Ltd and its partners had told the hospital operator they were prepared to commence due diligence even though their $2.36 per share indicative offer was rejected as "less attractive". Healthscope said it would consider the matter.

"BGH (and its partners) are indicating they are still interested and I presume they will remain patient," said JPMorgan's Low.

Last month, Healthscope said it had provided due diligence materials to Brookfield after picking the Canadian firm's $2.585 per share offer, which valued the hospital operator at A$4.1 billion.

Representatives at Brookfield or BGH were not immediately available for comment on Friday. ($1 = 1.4059 Australian dollars)

Reporting by Paulina Duran in SYDNEY and Aby Jose Koilparambil in BENGALURU; Editing by Stephen Coates and Christopher Cushing

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