Medibank eyes hospital operator Healthe Care

Medibank may be looking at Healthe Care’s acute care hospitals, which are up for sale through JPMorgan for a price believed to be about $600m.

Medibank could be back on the acquisition trail and this time within its sights is thought to be the hospital operator Healthe Care.

As Medibank continues its search to find a new chief executive, the thinking is that the Australian private health insurer may be looking at Healthe Care’s acute care hospitals, which are up for sale through JPMorgan for a price believed to be about $600m.

The understanding is that Carl Adams, a former Healius executive who runs a healthcare management consultancy business, has been looking at the assets. His son, Lloyd, runs Healthe Care’s private hospital in Hurstville.

Carl Adams worked with Medibank last year when it made its move on a 49 per cent stake in the East Sydney hospital in Woolloomooloo and some suspect he could be working on behalf of the listed medical insurer this time around.

Another suitor in the mix is understood to be the not-for-profit healthcare provider St John of God, which is looking to bulk up its exposure to Sydney and Melbourne. Also lining up is Pacific Equity Partners, advised by Macquarie Capital, and other buyout funds like Brookfield (the owner of Healthscope), BGH Capital, Bain Capital, Baring Private Equity, TPG Capital, Kohlberg Kravis Roberts and The Carlyle Group are no doubt at least taking a look.

First round bids are due around April 8.

PEP is considered a strong candidate because it has aspirations to grow its Evolution Healthcare business, which consists of a number of regional hospitals based in New Zealand.

It purchased Evolution Healthcare in March 2019 for a price thought to be about $300m and it is run by Ben Thyne, who also founded Healthe Care.

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 remaining Healthe Care assets within the country’s third largest private operator.

Healthe Care has named the $1bn-odd division that it plans to list “Aurora Healthcare” and has tapped investment bank UBS and Bank of America for the float.

It will be interesting to see if Luye later opts for a trade sale of that part of the business as well, given that the country’s largest private hospital operator Ramsay is trading at a price that many believe does not do the company justice. Ramsay is the most logical IPO comparable.

Aurora Healthcare includes Healthe Care’s Australian mental health, rehabilitation assets and Singapore-based oncology assets across 25 sites.

The company generated $380m of revenue in 2019, 75 per cent of which was in Australia.

Meanwhile, much of whether Medibank remains in acquisition mode will no doubt depend on the view of its incoming chief executive, who will replace Craig Drummond.

It is searching for a replacement through executive search firm Russell Reynolds Associates and in the mix is believed to be former Healthscope managing director Gordon Ballantyne, along with internal candidates such as Mark Rogers, David Koczkar and Andrew Wilson.

The purchase of a stake in the short-stay hospital last year was part of a move by Medibank to reduce healthcare costs for its customers while also reducing their medical insurance expenses and offering a shorter stay for patients.