Carlyle, TPG Agree to Buy Healthscope for $1.7 Billion
Healthscope Chairman Linda Nicholls
Healthscope Ltd via Bloomberg
The new owners plan to “retain management and support management’s strategy, business plans and growth initiatives, ” said Healthscope Chairman Linda Nicholls.
The new owners plan to “retain management and support management’s strategy, business plans and growth initiatives, ” said Healthscope Chairman Linda Nicholls. Source: Healthscope Ltd via Bloomberg
July 19 (Bloomberg) -- Bloomberg's Iyan Adewuya discusses Nokia Siemens Networks' agreement to pay $1.2 billion for wireless network assets from Motorola Inc. to expand in North America and Japan. Adewuya also discusses Carlyle Group and TPG Capital's agreement to buy Australia's Healthscope Ltd. for A$2 billion ($1.7 billion) and Kinder Morgan Inc.'s possible initial public offering. He talks with Scarlet Fu on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Carlyle Group and TPG Capital agreed to buy Australia’s Healthscope Ltd. for A$2 billion ($1.7 billion), gaining the second-biggest hospital operator in a market where health spending is rising about 11 percent annually.
Shareholders should accept the A$6.26-a-share cash offer, the Melbourne-based company said today. That’s 39 percent higher than the stock price before Healthscope disclosed a takeover offer on May 14. Including debt, the offer values the company at A$2.7 billion, Healthscope said.
Healthscope shares surged to the highest in three years after the announcement ended two months of speculation on details of the buyout, which would be the largest in Australia since 2002. The purchase will give the private-equity group a company whose cash from operations has increased fivefold in as many years.
“They have essentially bought a dividend stream, which looks pretty good,” Shane Storey, an analyst at Wilson HTM Investment Group in Brisbane, said by telephone. “Their hospital division is a very nice business.”
Healthscope gained 10 percent to close at A$5.94, the highest since May 14, 2007. The stock has advanced 17 percent this year.
The company owns or runs 44 hospitals including the Prince of Wales Private Hospital in Sydney’s eastern suburbs and Melbourne Private Hospital on the fringe of the central business district, according to its website. It also operates a pathology chain in Australia, New Zealand, Malaysia and Singapore.
Higher Dividends
Healthscope’s dividend payout has increased 15 percent in the past five years, according to data compiled by Bloomberg. That’s more than the 12 percent combined average growth for Ramsay Health Care Ltd. and Sonic Healthcare Ltd., its biggest Australian rivals in hospitals and pathology respectively.
Australia’s government projected in May that health-care spending would rise in the four years through June 2014 to reach about A$80 billion. Reduced government subsidies for medical services such as blood tests have led to a weaker earnings outlook for pathology companies including Sonic.
Healthscope, led by Chief Executive Officer Bruce Dixon, gave bidders access to its accounts after receiving competing proposals. Healthscope said May 20 its board was considering an offer of A$5.75 a share, raised from A$5.50 announced on May 14. Two more takeover offers of A$5.80 a share were received, the company said May 31, without identifying the potential buyers.
Rival Bid
KKR & Co. also submitted a bid, two people familiar with the matter said. Blackstone Group LP dropped out of the Carlyle- TPG bidding group, according to media reports.
The new owners plan to “retain management and support management’s strategy, business plans and growth initiatives,” Healthscope Chairman Linda Nicholls said in a statement.
Healthscope expects the transaction to be completed by October after shareholder and regulatory approval. Goldman Sachs JBWere Pty and Lazard are its advisers.
Carlyle and TPG are paying about 18 times estimated earnings per share for the year ending June 2011, Wilson HTM’s Storey said. Ramsay shares trade at 17 times, Bloomberg data show.
“These guys are getting it at a reasonable price, not one that I would call outstanding,” said George Clapham, who oversees $4.3 billion of equities excluding Healthscope at Arnhem Investment Management in Sydney. “Their timing is good and the stock had been discounted because of the pathology business.”
Carlyle and TPG arranged about A$1.5 billion in five-year loans from 17 banks, including Australia & New Zealand Banking Group Ltd. and Commonwealth Bank of Australia, to help fund the purchase, said a person familiar with the matter.
Buyout Deals
The transaction would be the biggest buyout in Australia since the 2002 takeover of Sydney Airports Corp., Bloomberg data show. Announced private-equity takeovers in the country total $2.7 billion so far this year, compared with $10 million in the same period in 2009, according to the data.
Private equity firms are resuming buyouts as economies recover. Washington-based Carlyle said in May it had $33.5 billion waiting to be invested at the end of 2009. The firm agreed last week to acquire Ronkonkoma, New York-based nutritional supplements maker NBTY Inc. for $3.8 billion.
The worldwide credit crisis has led banks to be reluctant to extend more than A$1 billion for a leveraged buyout, even when lending together, the Australian Private Equity & Venture Capital Association Ltd. said last month.
Today’s announcement “shows the confidence that private equity see in Australia,” said Bryan Zekulich, Sydney-based private equity managing partner at Ernst & Young LLP. “Debt capacity is back sufficiently for larger deals.”
To contact the reporters on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net; Jason Gale in Singapore at j.gale@bloomberg.net.
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