Healthscope offers suitors due diligence with sale process afoot

Healthscope is the country’s second largest private hospital operator, behind Ramsay Health Care. Picture: iStock.

Suitors interested in buying Brookfield’s embattled private hospital operator Healthscope will be offered the opportunity to conduct due diligence on the business in about a fortnight, say sources.

It comes after private equity firm Brookfield called for indicative bids by the end of May to determine whether to sell the cash-strapped hospital operator.

Healthscope has secured an agreement with the majority of its lenders to suspend its interest payments on its $1.4bn of debt for up to about six weeks.

DataRoom understands Bain Capital has hired former Healthscope executives to help assess a possible offer, but still remains undecided as to whether it will get involved.

Healthscope’s larger rival, Ramsay, is passing on the opportunity to gain control of hospitals from its competitor, say sources.

This comes is as it wrestles with its own challenges, namely selling its European business and keeping its own company performing well in a tough operating market.

Meanwhile, hospital operator Healthe Care, which is owned by Pacific Equity Partners, is only interested in buying one or two assets out of its portfolio of 38, is the talk in the market.

Then there’s HMC Capital, which has publicly expressed its interest in buying the business, partly to protect the rents of its listed satellite HealthCo REIT, which is Healthscope’s landlord.

But, there’s some serious questions in the market about whether the David Di Pilla-led HMC can take on the challenge with so much on its plate.

There’s also questions on where HMC gets the capital from to buy the business and whether Mr Di Pilla would be happier to see another party buy Healthscope’s debt cheaply so it is in a better position to pay rent.

It could all mean the country’s second largest private hospital operator ultimately stays with Brookfield, which then works to address Healthscope’s challenges and potentially inject more equity into the business.

Other options are voluntary administration or financiers buying the debt and recapitalising Healthscope, as was the case with cancer care provider GenesisCare in 2023.

Healthscope is advised by Moelis.

Brookfield bought Healthscope in 2019 for $4.4bn and sold its properties for $2bn, but it has been buckling under its $1.4bn of debt, rent payments, higher costs, and has been in dispute with healthcare funds over reimbursement of services payments, with devices pricing a particular issue.

Sources say the company needs more funding to improve the business and boost its earnings.

The situation is unfolding as the NSW Labor Government on Thursday announced legislation banning all future public-private partnerships being imposed on the state’s acute hospitals.

Healthscope entered into a PPP with the NSW government in 2014, but the understanding is, at a time it is struggling, Healthscope may opt to hand the keys of the hospital back to the government in its fight for survival.