HealthCo has confirmed the private equity arm of its parent company, HMC Capital, is in talks about a potential buyout of Healthscope.
It comes after DataRoom revealed this week that David Di Pilla’s HMC Capital-related interests were working on the move.
Healthscope is the country’s second largest private hospital operator and is owned by North American private equity firm Brookfield.
It is buckling under $1.6bn of debt amid a high cost environment in the healthcare industry.
Listed real estate group HealthCo said in a statement on Friday while delivering a $15.4m loss for the six months to December, that HealthCo and its unlisted health fund had been approached by “capable and qualified” parties to potentially tenant the 11 hospitals leased to Healthscope, including a consortium led by HMC Capital’s Private Equity division.
“HealthCo understands that HMC is in discussions with a broad group of key stakeholders as part of the consortium.
“HealthCo will consider all proposals.”
DataRoom reported this week that the consortium also includes health insurer Bupa.
Bain Capital is also showing interest in buying the company’s equity or debt and may be part of those talks.
Brookfield purchased Healthscope for $4.4bn in 2019, fending off competition from BGH Capital, and then sold its real estate sites to two separate groups to help pay for the deal.
However, the understanding is that Brookfield has conceded that there is no longer any equity in the business and is now prepared to take a pragmatic approached to ensuring it has a sustainable future.
When Brookfield bought Healthscope, it sold its real estate for about $2bn.
HMC Capital entered the mix at a later stage and bought half of the portfolio through the HMC-managed HealthCo, in conjunction with a newly established HMC-managed unlisted fund, which has debt.
It cut a deal on rents with Healthscope – reducing them for two years in exchange for higher increases over the longer term.
At the time of the deal, rent was increasing annually at 2.5 per cent, but in return for a reduction, future rents will increase by 4 per cent or more if inflation is more than that level.
NorthWest owns the other half of the Healthscope real estate portfolio, and receives 2.5 per cent increases in rent annually.
The share price of HealthCo has fallen to 99c from over $2 when it first listed in 2020 and its market value is currently $536.8m as the market remains nervous a potential collapse of Healthscope could be looming.
HealthCo said in the event that Healthscope were to breach its lease obligations, HealthCo would seek to replace Healthscope’s tenancies with other hospital operators.
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