MELBOURNE (Reuters) – Australian hospital operator Healthscope (HSP.AX) said it has received a $1.6 billion takeover approach from a group of buyout firms, which a source said were Carlyle Group and TPG.
Healthscope shares soared as much as 21 percent to a two-year high on news of the approach, which marked a return of big private equity deals to the Australian market after a two-year slump during the financial crisis.
Fund managers described the offer as opportunistic on the part of private equity, saying the bidders were seeking to take advantage of depressed returns in the pathology industry and weak share prices as the industry faces a government review.
“It is fairly lean. If you look at the potential there to break up the business, to sell diagnostics and retain hospitals, there is value there,” said Fortis Investment Partners managing partner George Clapham.
Healthscope did not name the bidders in the consortium and said it had yet to form a view on the takeover approach, which it described as indicative and non-binding.
“The Healthscope board…recommends shareholders take no action at this time,” the company said in a statement.
A spokeswoman for Healthscope declined to say when the company would make a further comment on the offer, which came on Thursday after the market closed.
Representatives of Carlyle and TPG did not return calls seeking comment.
The offer, at A$5.50 per share, values Healthscope at A$1.74 billion ($1.6 billion) and its shares jumped to a high of A$5.45, the best level since April 2008. Shares closed up 17.3 percent at A$5.28, on turnover nearly eight times the average volume over the past 30 days.
Private equity firms have shown an appetite for healthcare businesses in the past, since they have good cash flows, stable returns and favourable demographic trends.
Australian private equity firm CHAMP private equity is currently in the process of selling its Healthcare Australia (HCA) business, the country’s largest nursing and aged care staffing business, which could go to a trade sale or initial public offering.
BACK IN ACTION
Private equity firms have been sidelined in terms of acquisitions in Australia for two years as the global financial crisis took its toll on the ability to borrow, and they are sitting on billions of dollars of untapped funds.
However, activity has picked up in recent weeks with two local private equity firms — Pacific Equity Partners and CHAMP — among the firms in the second round of bidding for pallet maker Loscam, sources told Reuters, in a deal that could be worth up to A$700 million.
Healthscope itself was in talks to acquire an aged-care business, Arcare, in February for about A$200 million but abandoned the plan, reportedly after opposition from key shareholders.
Sources said Credit Suisse and Macquarie Bank were advising the TPG/Carlyle consortium, while Goldman Sachs JBWere was advising Healthscope. The banks declined to comment. (Additional reporting by Sharon Klyne; Editing by Lincoln Feast)