Crescent Capital’s Australian Clinical Labs heading for IPO

Australian Clinical Labs is the third-largest pathology player in the local market.

Crescent Capital is believed to be reviving attempts to sell its Australian Clinical Labs business — this time through an initial public offering.

After running a sales process last year, the understanding is that adviser Bank of America is now preparing the business for a run at the boards, and the float could be on the runway in the short term, say sources.

It comes only weeks after Australian Clinical Labs underwent a refinancing with Commonwealth Bank of Australia, thought to be worth about $250m.

Australian Clinical Labs is the third-largest pathology player in the local market and comprises Healthscope’s former pathology assets, which were bought five years ago for $105m, and the operations formerly owned by St John of God.

For the 2020 financial year, Australian Clinical Labs generated $30m in earnings before interest, tax, depreciation and amortisation, according to the information memorandum that was presented to buyers last year. This was predicted to increase to $70m this financial year.

The business has been a major beneficiary of laboratory testing for the COVID-19 global pandemic.

Based on the current earnings forecasts, it is understood that Crescent Capital was hoping to sell the business for about $600m.

But private equity firms that were circling the business are said to have been concerned that the massive earnings growth would not be sustainable when more normal trading conditions prevailed.

Several private equity firms, such as Pacific Equity Partners, were believed to have circled the pathology provider early on, while last year, Sonic Healthcare and Healius were understood to be potential buyers.

Crescent Capital is also expected to sell its home doctor service provider 24-7.

Meanwhile, JPMorgan has now been hired to sell Healthecare’s acute care hospitals, while investment banks Bank of America and UBS continue to work towards an initial public offering of its mental health and rehabilitation assets.

Healthe Care is owned by Luye Medical, which purchased the business from Archer Capital in 2015 for $938m.

The division it hopes to float is expected to be worth up to $1bn.

The offering includes 25 sites, including 16 in Australia, with seven operating in the area of mental health, three in rehabilitation and six in the area of integrated mental health and rehabilitation.

The company generated $380m of revenue in 2019, 75 per cent of which was in Australia.

Elsewhere, Pacific Equity Partners continues to be considered to be in the box seat to buy Everlight Radiology after other buyout funds had earlier considered an acquisition of the business.

Earlier, the company was expected to be sold through Rothschild for about $400m after generating about $30m of annual EBITDA.