Bain, Macquarie exit I-MED contest

I-MED Radiology is the country’s largest diagnostic imaging services provider. Picture: Monique Harmer/AAP

Bain Capital and Macquarie Asset Management are both out of the $3bn contest for I-MED Radiology, although some suggest that the move may be a negotiating tactic by the latter to batter down the price, say sources.

It comes after DataRoom reported on October 31 that Bain Capital, which has also been looking at TPG Capital’s Asia Pacific biotech company Novotech, could be cooling on the opportunity.

MAM had been carrying out due diligence, but had struggled to get a deal to stack up at the asking price of private equity seller Permira.

It was due to lob its final bid this week after carrying out two weeks of due diligence, but it bowed out before lobbing its final offer.

Now there’s chatter an initial public offering for the business may be an option on the table for the business as early as next year.

Industry sources pointed to I-MED being less user-friendly from a customer service perspective than some had anticipated, while smaller rivals are offering the same services at cheaper rates.

Additional factors playing on the minds of suitors have been market regulatory risks, with concern that with artificial intelligence creating more efficiency, the market may change pricing.

Another concern is high doctor turnover and that the business does not justify a premium price.

Others may be part of the conversation again if the asking price is reduced.

Pacific Equity Partners and TPG Capital had earlier taken a look.

Affinity Equity Partners purchased Lumus Imaging from Healius for $965m before the auction started, and both PEP and TPG were under bidders.

I-MED is the largest diagnostic imaging service provider in Australia and its owner, Permira, has placed the business up for sale through investment banks Jefferies Australia and Morgan Stanley.

Private equity firms have been interested in the sector with the hope that the growing use of artificial intelligence can create greater earnings opportunities.

Interested buyers first came forward to Permira with indicative offers before a formal process was launched where parties were allowed to carry out due diligence.

I-MED is understood to be forecast to generate about $250m of earnings before interest, tax, depreciation and amortisation.

Permira purchased I-MED in 2018 for $1.3bn, or 11 times its earnings from EQT.

It has more than 240 clinics across Australia.

No doubt much of whether a float of the business is on the cards will be determined by the level of success of Cuscal and HMC Capital’s DigiCo REIT that are both heading to the boards before Christmas.