Healthy diagnosis for Healius vet pathology operations after surprise raising

Healius does not split out the vet pathology operation, but some think a sale could reap the company about $100m.

In the fallout from the shock equity raising by Healius, attention has turned to vet pathology operations.

Healius management has previously signalled to investors that the business would be very attractive to various buyers, and something that could be offered up for sale.

The most logical buyers are TPG Capital, which owns the vet care business Greencross, VetPartners, owned by EQT, or Wesfarmers, which has adjacent businesses in its company Australian Pharmaceutical Industries.

The reasons it would be attractive are the adoption spree during the pandemic and the fact that services are not reliant on government funding, offering the opportunity for higher margins.

Healius does not split out the vet pathology operation, but some think a sale could reap the company about $100m.

Another option is selling its diagnostic imaging arm, but that would be a more radical move.

The Healius share price is down almost 50 per cent over the past year.

Only two weeks before it launched a heavily discounted equity raising, it was planning to hold off on the move.

But it was forced to raise by its lender CBA, as a condition of its refinancing, replenishing its balance sheet with about $150m and reducing its $450m net debt.

The Healius raising came after lenders waived its covenant.

The company initially sought about $250m, then $215m, before dialling the deal back to $187m at the request of influential investors (the company counts John Wylie’s Tanarra among them, with just over 8 per cent of the business).

Shares were sold at $1.20 each, a steep 34.6 per cent discount to their last closing price of $1.84, with shareholders getting one share for every 3.65 held in the fully underwritten deal.

The company secured a strong price for the sale of its general practice unit to BGH Capital in 2020 at around $500m. It was seen to be on the right path in abandoning its day surgery plans by selling the business to QIC in 2002 for around $140m.

But there were missteps after that: not paying down all of its debt with the proceeds, but returning some to shareholders, and then the disastrous acquisition of Agilex Biolabs in 2021, where it wrote off $170m of its value after paying $300m.

It struggled to stay on top of its costs, and posted a $367.8m loss in August.

Chairman Jenny Macdonald, a former Helloworld boss, is now staging an exit after stepping up to the role following the abrupt departure of Robert Habbard due to health reasons.

Meanwhile, with Integral Group chair Toby Hall advising Partners Group on its acquisition of the Cura day surgery provider, some say a buyout by the private equity firm of the listed diagnostic imaging services provider may be on the cards.

Sources say while they have no knowledge of talks between the pair, it makes sense for Partners to buy Integral Diagnostics, which has seen its share price fall 38 per cent in the past year, because it also owns the QNTM Medical in Europe.