Private hospital operator Healthscope has responded to the pressure from two unwanted takeover offers from private equity and decided it will sell its Asian pathology business for $279 million to entities controlled by funds managed by TPG Capital Asia.
Healthscope remains the subject of takeover talk, having rejected two $3 billion-plus offers earlier this year after saying they were conditional and undervalued. One offer came in late April from local private equity group BGH Capital, along with big Healthscope shareholder, Australian Super and Ontario Teachers’ Pension Plan Board and Canada Pension Plan Investment Board.
The other came in mid May from Canada’s Brookfield Asset Management which offered $4.35 billion for Australia’s second largest private hospital operator. It went nowhere because Australian Super (with 16% of Healthscope) made it clear it would not sell.
Healthscope rejected by offers saying they undervalued the company and wouldn’t allow the groups to do due diligence on Healthscope’s operations and finances.
The company did say it would review its property holdings and other assets and the Asian pathology business was identified early on as an asset to be sold.
Healthscope said yesterday it expects to complete the sale transaction by the end of August and to book a one-off gain of $165 million in its 2018-19 financial results, with the sale proceeds to be used to pay down debt and fund its expansion plans.
The Asian pathology operations consist of 39 pathology laboratories across Singapore, Malaysia and Vietnam that operate under the Gribbles Pathology and Quest Laboratories brands. They contributed EBITDA of $18.2 million in the 2017 financial year, and $9.6 million in the first quarter of this year.
“We are pleased with the outcome of the strategic review, which releases significant value for Healthscope shareholders following a thorough and competitive sales process,” the company’s chief executive Gordon Ballantyne said. “The decision to divest will allow our management team to focus on our core operations.”
TPG partner and head of Australia and New Zealand Joel Thickins said the company was “excited” to be acquiring “this very sough-after asset”.
“Healthcare is a core sector speciality for TPG and this is a great example of having pan-Asian expertise to execute a cross-border transaction,” he said. “Our primary ambition is to scale and grow the platform across Asia, as we are doing with a number of our other portfolio investments,” he added in the statement yesterday. Healthscope shares rose 0.9% to $2.21.
