Healthscope targeted by $4.1bn takeover bid by BGH Capital, backers

Healthscope CEO Gordon Ballantyne. Pic: Aaron Francis

Shares in Healthscope jumped more than 14 per cent today after a consortium, led by private equity group BGH Capital, launched a $4.1 billion bid for private hospital group.

Healthscope told its investors today that its board would assess the unsolicited proposal of $2.36-cash-per-share, which it said was a 16 per cent premium to its closing price on Tuesday.

Shares in the company (HSO) traded higher on the news, adding 30c in early trade to $2.33.

The deal comes as Australia’s private healthcare system struggles with affordability issues as consumers increasingly dump private health insurance.

Private hospitals have also been hit by public hospitals increasing their share of private paying patients.

Healthscope, which operates about 45 hospitals in the country as well as pathology services across parts of the Asia-Pacific region, has been negatively impacted by the wider industry headwinds. In February its shares dipped to $1.80 when it reported a drop in its half-year profit.

The company also announced at its half-year results a review of its Asian pathology business. Chief executive Gordon Ballantyne said given it only represented four per cent of Healthscope’s portfolio and its focus was in Australia and New Zealand, it decided to look at various options for the Asian business in the future.

Morgan Stanely had an “underweight” rating and a $1.67 price target on Healthscope before today’s bid was announced.

Analyst Sean Laaman had also outlined earlier this week that a profit warning by comparison website iSelect on Monday could signal further ongoing risk to private hospital volume recovery.

Founded in 1985 and initially listed on the Australian Securities Exchange in 1994, Healthscope was bought in late 2010 by a consortium managed by TPG and the Carlyle Group. It was again listed on the ASX in mid-2014.

The shares peaked in September 2016 at about $3.

The offer comes after The Australian’s DataRoom last week revealed that Macquarie Capital was pulling together a consortium including BGH Capital to bid for the company.

BGH Capital is the fund founded by former TPG Capital Australian managing director Ben Gray and his offsider Simon Harle, along with the former head of Investment banking at Macquarie, Robin Bishop.

Mr Gray and Mr Harle jointly led TPG’s previous investment in Healthscope. TPG and the Carlyle Group bought it for $2.7bn in 2010 and sold via an initial public offering four years later, when the company was valued at $3.6bn.

The latest bid is subject to several conditions, including that the Healthscope board unanimously recommend that shareholders back the deal.

AustralianSuper, which has a 14 per cent stake in Healthscope, has backed BGH Capital in its bid. Carob Investment Private, which is a subsidiary of the Singapore Sovereign Wealth Fund GIC, the Ontario Teachers Superannuation Fund and the Canada Pension Plan Investment Board have also joined BGH’s push for Healthscope.

Healthscope would be highly sought-after not only for its hospital operations but also its lucrative real estate portfolio, with it owning hospital sites worth about $1.2bn.