Luye Medical shortlists bidders in Healthe Care hospital contest

A number of Catholic charitable organisations are believed to be in the mix for Healthe Care’s acute care hospitals.

Luye Medical is understood to have shortlisted parties in the contest for Healthe Care’s acute care hospitals.

Not-for-profit Catholic health care organisations The Little Company of Mary, Calvary, and St John of God Health Care are believed to be in the mix.

St John of God is understood to be eager to increase its exposure to the Melbourne and Sydney markets.

Australian-listed private health insurer Medibank is not thought to have entered the second stage.

Working on the sales process is investment bank JPMorgan.

Some believe that the business may sell for between $380m and $400m.

A key consideration for suitors will be rental rates on the acute hospitals, which are expected to significantly ramp up in future.

Also, Healthe Care’s doctors — a number of whom previously worked at Ramsay and Healthscope — could have a say.

About nine of Healthe Care’s acute care hospitals in Australia are believed to be on offer. They are forecast to generate $41m of annual earnings before interest, tax, depreciation and amortisation, compared to $27m for the previous corresponding period.

Luye has indicated that about $100m of revenue upside exists in the portfolio.

Meanwhile, Brookfield, which owns the country’s second-largest private hospital operator, Healthscope, has also made it through to the second round.

The Canadian private equity fund purchased Healthscope in a $4.4bn public market deal in 2019 and is said to be in acquisition mode, with day surgeries also on its agenda.

Australian-listed Ramsay Healthcare is another that has made it through to stage two, but sources say that its interest lies in buying the Gosford private hospital within the portfolio.

Regulatory constraints rule it out of buying Healthe Care’s acute hospitals in Hurstville and Wollongong, NSW, while the Melbourne assets are not expected to be to Ramsay’s liking.

However, the competition favourite is Pacific Equity Partners, which is advised by Macquarie Capital and is also in the final phase.

PEP owns the Evolution Healthcare business, which consists of a number of regional hospitals in New Zealand.

It purchased Evolution Healthcare in March 2019 for a price thought to be about $300m. It is run by Ben Thyne, who also founded Healthe Care, the country’s third-largest private hospital operator. First-round bids were due last Thursday and final bids are due within six weeks for the acute care assets.

Healthe Care is offloading assets as part of a move to reduce its $800m-odd debt pile, with Goldman Sachs one of its key lenders.

Luye Medical purchased Healthe Care from Archer Capital in 2015 for $938m after it was established in 2005 by Mr Thyne.

While looking to sell Healthe Care’s acute care hospitals, China’s Luye is also attempting to float the 25 remaining Healthe Care assets within the country’s third-largest private operator.