Shareholder pressure is believed to be mounting on Healius to embark on a merger with pathology rival Australian Clinical Labs.
It is understood shareholders at Healius have approached the company’s board, testing its views on a merger with ACL as the share price of both companies have declined in the past year.
ACL provides pathology services, and pathology is one of the main revenue earners for Healius, along with diagnostic imaging.
Earnings have fallen from since the height of the pandemic, when pathology services were in strong demand.
Plaguing healthcare companies now is staffing shortages, driving costs higher, and compounding the weaker demand for pathology.
Crescent listed the pathology business in 2021, selling shares at $4 each with its market value at $809.3m.
In August, Crescent Capital sold down 14.3 per cent of the company for $130m, or $4.50 a share, leaving the private equity firm with a 30.1 per cent holding.
The buyout fund is known to be a seller.
ACL shares are now at $3.05, while shares in Healius have also underperformed, at $3.21, down from about $4.50 a year ago.
The logic of a merger is that, as a combined entity, the company may stage a stronger performance.
However, any tie-up would almost certainly draw the attention of the Australian Competition & Consumer Commission, and some believe combining the businesses would not be a smart move for Healius.
Healius counts Perpetual, the Australian Retirement Trust and Tanarra Investments, headed by former investment banker John Wylie, among its largest investors.
Mr Wylie is known to agitate for change at underperforming companies after gaining a presence on their register.
ACL’s second-largest shareholder is investment bank Goldman Sachs, with a 15 per cent stake.
Healius is known to be a perennial takeover target, with an infrastructure investor believed to have been looking at the company late last year around the time that chief executive Malcolm Parmenter announced his departure.
China’s Jangho offered $1.8bn for Healius in 2019, but was rejected, while Partners Group offered $2.1bn in 2020 but was also rebuffed.
PEP and EQT are believed to have weighed an approach in the past.
Shares in ACL peaked around $6.20 last month as demand for pathology testing services went through the roof amid a major Covid-19 outbreak in Australia.
ACL 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 June last year, ACL generated $178.2m in net profit, compared to $88.7m in the previous corresponding year.
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