Crescent Capital adds scale for $1bn-odd healthcare float

Crescent Capital’s healthcare float to be close to $1bn.

Crescent Capital is understood to be not only listing its Australian Clinical Labs business, but also its SunDoctors Skin Cancer Clinics as part of an upcoming healthcare float that is likely to be valued at close to $1 billion.

The private equity firm is believed to be working on gaining early investor support for its initial public offering akin to a cornerstone process through Bank of America and Goldman Sachs, with Crescent to retain a substantial stake of the business once it is listed and a small selldown on the cards.

DataRoom understands that the size of the IPO will be in the ballpark of $400m.

Analyst research on the healthcare offering is out on Friday.

The SunDoctors business is being folded into Australian Clinical Labs as part of the IPO, but the company will still retain the Australian Clinical Labs name.

Early investor education meetings were launched with investors last month and it is understood that there has so far been strong investor demand for the IPO.

Collectively, the two businesses generated $116m of earnings before interest, tax, depreciation and amortisation for the 2020 financial year, and that is expected to grow to $208m for fiscal 2021.

SunDoctors is a business that works to detect and treat skin cancer, with highly trained doctors and results processed in its own specialist pathology laboratory.

It is the largest in Australia with a particular focus on skin cancer.

Crescent’s pathology services provider Australian Clinical Labs, meanwhile, has experienced booming demand on the back of the global pandemic.

The SunDoctors operation offers earnings diversity, easing any concern about ACL’s rampant earnings growth linked to the global pandemic not being sustainable.

ACL is the third largest pathology player in the Australian market and it comprises Healthscope’s former pathology assets, which were bought more than five years ago for $105m, along with operations formerly owned by St John of God.

It has a strong presence in Western Australia, Victoria, South Australia and Northern Territory.

Bank of America ran a sales process for Australian Clinical Labs last year but owners then opted to retain the business when buyers were unprepared to meet price expectations, thought to be about $600m.

The company then underwent a refinancing with the Commonwealth Bank of Australia, believed to be worth about $250m, and the fact that the business has low debt levels is likely to be a drawcard for investors.

It is understood that for the 2020 financial year, Australian Clinical Labs, excluding SunDoctors, generated $30m EBITDA, according to the information memorandum that was presented to buyers, increasing to $70m.

Crescent Capital has a history of rolling businesses together for floats.

It listed the travel insurer Cover-More Group in 2013, it also included another business in the offering to add scale.