Crescent Capital ‘closing in on’ PRP Diagnostic Imaging

PRP is owned by various shareholders.

Australian-based private equity firm Crescent Capital is believed to be closing in on health industry software business PRP Diagnostic Imaging, with a deal said to be not far off.

The company is one of few in the healthcare space that is believed to be forging ahead with sales plans, despite challenges related to COVID-19.

Medical Director had been on offer before the onset of the COVID-19 crisis but had paused its sale plans, yet expectations are it could be back on the market by private equity owners in the second half of this year.

With respect to PRP, former Macquarie Group and CLSA investment banker Mark Dorney has been running a sales process for the business that has about 30 radiology clinics in NSW and has been put up for sale twice over the past two years.

While it is unclear what Crescent might be paying for PRP, the earlier thinking had been that it could sell for about $300m, or a price equating to 12 or 13 times its earnings.

Crescent has been active in the healthcare market of late and is also said to be one of the contenders that has been lining up for the Healius medical centre division, on the market through investment banks Morgan Stanley and UBS.

1 2 3 4 5

Its other healthcare investments include the pathology business Australian Clinical Labs.

PRP is owned by various shareholders, including Mr Dorney’s former offsider at Citic-CLSA, Andrew Low, who has also since departed and former Macquarie Group boss Nicholas Moore.

It was originally owned by doctors, but the bulk of the operation was snapped up by Shanghai-listed Hengkang Medical Group, which was founded by billionaire Que Wenbin.

Hengkang acquired a 70 per cent stake in PRP in 2017 for $336m, leaving the doctor shareholders with 30 per cent.

It is understood that parties picked up stakes in PRP last year from the Chinese for between seven and eight times earnings.

Meanwhile, Affinity was always expected to sell the business that it purchased in 2016 for $155m from Primary Healthcare (now called Healius) this year, so a sale is largely expected to proceed, although broader market conditions and overall confidence will surely play a part.

The sale of Medical Director is being advised by Jefferies Australia.

Last year, it was suggested that Medical Director generated about $30m in annual earnings before interest, tax, depreciation and amortisation and could sell for 15 to 20 times its earnings, although the company will be hitting the market in a vastly different environment.

When it comes back on offer, the position of Affinity Equity Partners, which owns the business, may have changed, with the Australian operations now headed by Sam Johnson.

Mr Johnson recently replaced Brett Sutton as the new head of Australia for Affinity Equity Partners and it could be possible he takes a different view on price and other factors when it comes to a divestment of the asset.

Last year proved to be a good one for Affinity in Australia, with it reaping strong prices for businesses it owned that are now reeling on the back of a coronavirus world.

It secured $1.3bn from Silver Lake for its Australian ticketing company that owns Ticketek, TEG Group, a price that was higher than many expected.

It also dodged a bullet with its Velocity frequent flyer program by selling the 35 per cent interest for $700m.

Virgin Australia has since collapsed into voluntary administration after being forced to ground most of its fleet due to the COVID-19 travel restrictions.

Other healthcare providers that could be divested by private equity towards the back end of 2020 are Quadrant Private Equity’s Qscan radiology business.