Equity capital market deals may be thin on the ground right now, but one that may emerge in the coming months is a block trade by Crescent Capital out of Australian Clinical Labs.
Crescent listed the pathology business last year, selling shares at $4 each with its market value at $809.3m.
Shares peaked around $6.20 in December as demand for pathology testing services went through the roof amid a major Covid-19 outbreak in Australia, and on Wednesday they closed at $4.45, taking its market value to $892.1m.
The logic for a sale by Crescent is that pathology services providers will not be seeing the euphoric conditions anything like they did in the past two years when demand hit fever pitch amid the pandemic.
Despite the sharemarket volatility, now may be the time to exit for Crescent as the country braces for a downturn in a low-growth, but rising inflation environment and the largest step-up in interest rates since 1994.
Crescent retained a 49 per cent stake in Australian Clinical Labs when it floated the business in May last year.
The holding was subject to voluntary escrow arrangements where it was able to offload a third of its stake after it delivered its half-year results in February and another third after delivering its full-year results in August.
The remainder could be divested following the delivery of next year’s full-year earnings results. This could see Crescent embark on a block trade of about $300m during the August reporting season should it choose to do so.
Weighing in Crescent’s favour is that healthcare companies are also seen as highly defensive amid difficult market conditions, so should it move forward with a selldown, there will no shortage of buyers for the shares.
The healthcare company listed last year through Goldman Sachs and Bank of America, so both investment banks would no doubt be lining up for any opportunity.
It is the country’s third-largest pathology network, comprising a roll-up of various businesses purchased by Crescent, including operations from Healthscope and St John of God.
For the six months to December, Australian Clinical Labs generated $130.3m of net profit, up 200.7 per cent on the previous corresponding period, and $239.3m of earnings before interest, tax, depreciation and amortisation.
Other ECM activity that may emerge around reporting season in August could include equity raisings by companies in the retail and consumer sectors, sources say, as they wrestle with rising costs and supply chain restraints.
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