Listed healthcare provider Healius is expected to be on standby to acquire the Australian Clinical Labs business should its private equity owner Crescent Capital struggle to find a party prepared to pay up for the operation.
Crescent Capital was understood to be in negotiations to sell part of its laboratory business to Healius last year and some assets to Sonic Healthcare.
The talk at that time was a deal involving such parties would not get past the Australian Competition and Consumer Commission. However, the thinking is that it could sell the operation to Healius, but that the listed group is not keen to meet its $600m price expectations.
Crescent is working with Bank of America to find a buyer of the country’s No 3 pathology services provider in Australia.
It comprises Healthscope’s former pathology assets which were purchased five years ago for $105m. It also includes the operations formerly owned by St John of God.
The pitch by Crescent is that Australian Clinical Labs is a vastly improved business to what it was. The group was generating annual earnings before interest, tax, depreciation and amortisation of about $25m, but now the annual EBITDA is more like around $70m to $80m.
Much of the improvement comes from taking costs out of the business and embarking on a restructure. But buyers will no doubt be wary that much of its success is due to the increase in the use of pathology services due to COVID-19.
The sale by Crescent follows the acquisition by the private equity fund of PRP Diagnostic Imaging.
Crescent is selling its pathology operations as it also offloads its doctor service provider 24-7 and its Myhealth Medical Group.
It comes as the sales process for Quadrant Private Equity’s Qscan operation continues to progress. Ramsay Health Care is taking a serious look at the business and is believed to be aided by Macquarie Capital, while the Queensland Investment Corporation is also bidding.
QIC has $83bn of funds under management and has earlier invested in healthcare. It was part of a consortium that purchased another healthcare operation on offer by Quadrant — cancer care provider Icon Group, which was sold for more than $1bn.
It is now known that QIC is bidding for Qscan independently of Icon Group, of which it owns about 20 per cent.
Qscan describes itself as a leading diagnostic imaging provider, operating at least 70 clinics with more than 100 radiologists and 730 staff.
Quadrant has hired Stanton Road Partners and Citic-CLSA as advisers to sell the business.
Prospective buyers are being told that Qscan generates about $50m of annual EBITDA, which could increase to $80m and then $90m in the next two years.
Some estimate that Qscan could be offloaded for about $700m, with companies in the healthcare space typically selling for 10 to 12 times their earnings.
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