Healthscope Gets Rival Buyout Offers from KKR, Others

SYDNEY (Reuters) – A private-equity bidding war broke out for Healthscope (HSP.AX) on Monday as Australia’s second-largest hospital owner received two more takeover approaches, both valuing it at A$1.84 billion ($1.56 billion).

Buyout firm Kohlberg Kravis Roberts & Co was one of the new bidders, according to two sources familiar with the situation. One of the sources said KKR was bidding alone at this stage.

The second bidder was US-based Tenet Healthcare Corp (THC.N), according to a report on The Australian newspaper’s website late Monday.

A spokesman for KKR in Sydney declined to comment. A spokesman for Tenet in Dallas said it was the company’s policy not to comment on market rumour and speculation.

The latest cash offers of A$5.80 a share topped an existing offer of A$5.75 a share from a rival private equity consortium of Blackstone Group LP (BX.N), TPG [TPG.UL] and Carlyle [CYL.UL]. Healthscope announced the receipt of the new offers but did not say who it came from.

Australia’s ageing population and a government push to increase private health insurance are benefiting healthcare firms in the country. Healthscope, which operates 44 private hospitals in Australia, has grown its core profit by 45 percent a year over the past five years.

The interest in Healthscope from four of the world’s biggest private-equity groups also highlights growing appetite for hospital chains in Asia.

Singapore’s biggest private healthcare group, Parkway Holdings (PARM.SI), received an $835 million offer from Malaysian sovereign fund Khazanah, pitting it against India’s Fortis Healthcare (FOHE.BO).

Shares of Healthscope, which also runs a pathology business with facilities in Australia, New Zealand, Singapore and Malaysia, ended 5 percent higher at A$5.49 after the news of the offers. Around 6.65 million shares changed hands, five times the 90-day average volume.

Analysts said the closing of the shares below A$5.80 priced in the risk that the non-binding offers might not ultimately result in a deal.


A successful bid would make Healthscope the largest private equity deal in Australia since 2008. The bid battle is being hailed as the return of buyout firms in Australia after the global financial crisis put the brakes on their ability to borrow for the last two years.

Analysts said Healthscope was an attractive target due to its strong cashflows and property assets. However, an apparent willingness by management to sell for the right price was one of the key factors attracting interest, they said.

UBS analysts said Healthscope looked more attractive if its assets were broken up, though an industry source said on May 20 that the Blackstone-TPG-Carlyle consortium had no plans to split the businesses.

“With three bidders there, just by sheer numbers, it increases the likelihood that someone is still going to have a bid in there at A$5.80 or around that level, post due-diligence,” UBS healthcare analyst Dan Hurren said.

The offer price of A$5.80 a share was a 10.9 percent premium to Friday’s closing share price. The offers were non-binding although both bidders would be allowed to conduct due diligence, which was expected to take several weeks.

Healthscope, in a statement, advised shareholders to take no action and added it would take several weeks to evaluate the offers.

At least three analysts have put valuations of between A$5.80 and A$6.70 on Healthscope if the company’s hospitals and pathology arms were broken up.

Hospitals make up around three-quarters of the group’s earnings, and analysts have speculated an acquirer could spin off the pathology business to rivals Sonic Healthcare (SHL.AX) and Primary Healthcare (PRY.AX).

Macquarie MQG.AX) and Credit Suisse <CSGN.VX are advising the TPG and Carlyle consortium, while Blackstone is being advised by UBS (UBSN.VX).

Healthscope is being advised by Goldman Sachs JBWere and Lazard. ($1=1.180 Australian Dollar) (Reporting by Michael Smith; Editing by Mark Bendeich and Muralikumar Anantharaman)