TPG, Carlyle Increase Offer for Healthscope to $1.5 Billion

MELBOURNE (Reuters) – Private equity groups TPG and Carlyle have raised their bid for Australian hospital operator Healthscope (HSP.AX) slightly to A$1.8 billion ($1.5 billion) trying to woo the board.

The bidders do not plan to split the group’s hospitals and pathology arms, an industry source said, deflecting speculation among analysts that the group could fetch as much as A$2 billion if the company was broken up.

“There’s no break-up planned,” said the source.

Healthscope, which has not named the bidders, said on Thursday the board was considering the new offer at A$5.75 a share, up from A$5.50, and advised shareholders to take no action.

Healthscope’s shares initially jumped 4.8 percent then eased to trade up 3.3 percent at A$5.35, holding below the offer value, after Reuters reported no break-up was planned.

The new offer was 28 percent above Healthscope’s last trade before it revealed the bid approach on May 14. But it is still well below break-up valuations between A$5.80 and A$6.70 that at least three analysts have put on Healthscope.

One shareholder said break-up valuations were speculative and declined to comment on whether A$5.75 a share was acceptable.

“It’s nicer than A$5.50. We’re just happy to wait and see. There’s no recommendation from the board yet,” said Mark Daniels, head of equities at Aberdeen Asset Management, which owns less than 1 percent of Healthscope’s shares.

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 Health Care (PRY.AX).

However Primary Health Care is not in a strong position to buy anything as it is still paying down debt on its A$2.7 billion takeover of Symbion Health two years ago, and dominant pathology group Sonic Healthcare (SHL.AX) could run into competition concerns.

Healthscope is being advised by Goldman Sachs JBWere (GS.N) and Lazard (LAZ.N).

The private equity groups are being advised by Macquarie (MQG.AX) and Credit Suisse (CSGN.VX).

By Sonali Paul
(Editing by Ed Davies and Valerie Lee)