Crescent Capital has added Goldman Sachs to the ticket for the initial public offering of its $600m Australian Clinical Labs business.
Goldman Sachs will join Bank of America in advising on the float.
The company’s listing plans are expected to heat up after reporting season, with equity investor education meetings set to start next month.
DataRoom flagged the float plans for Australian Clinical Labs last week.
Market sources expect that the business, which is the third largest pathology player in the Australian market, will be well received by equity investors at a time that healthcare assets remain in strong demand.
It comprises Healthscope’s former pathology assets, which were bought more than five years ago for $105m, and the operations formerly owned by St John of God.
Bank of America ran a sales process for Australian Clinical Labs last year but owners opted to retain the business when buyers were unprepared to meet price expectations of about $600m.
Recently, the company is understood to have undergone a refinancing with the Commonwealth Bank of Australia, thought to be worth about $250m.
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.
Australian Clinical Labs will be one of two healthcare businesses on the runway for a float, with China’s Luye Medical planning a listing of Healthecare’s mental health and rehabilitation assets.
Bank of America is also working on that float, along with UBS, and it is understood that its mental health business has been growing strongly.
Sources say its strategy has been to convert some of its rehabilitation assets to mental health facilities and Luye Medical will be selling to investors the prospects for Asian expansion.
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.
Separately, investment bank JPMorgan is selling the remainder of Healthe Care, which is the country’s third largest private hospital operator.
This includes its acute care hospitals, which some expect to fetch around $600m.
The most attractive hospitals in the portfolio are its Lingard and Gosford private hospitals in NSW.
Possible buyers include Ramsay Health Care or Brookfield, which owns the second largest private hospital operator Healthscope, although they could face competition issues.
Another could be Australian Unity, while private equity is expected to have keen interest.
Luye was understood to have been fielding offers from buyers for Healthe Care last year and sent out promotional material for a sale of its acute care hospitals about a week ago.
Luye Medical purchased Healthe Care from Archer Capital in 2015 for $938m.
It was established in 2005 by Ben Thyne, who now runs Evolution Healthcare and may take another look at the assets.
Market experts say that mental health assets were typically more popular for buyers in the healthcare space than rehabilitation, which was largely driven by surgery and could be carried out over one day or at home.
However, the logic to split the businesses up is that they are likely to appeal to a different group of buyers.
Moves by Luye to sell Healthe Care assets were first flagged by DataRoom in November and are understood to come as part of an effort to drive down debt.
When Luye purchased Healthe Care it fought off competition from Bain Capital and Baring Private Equity.
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