PEP hires Macquarie for $600m pursuit of Luye’s Healthe Care hospitals

Healthe Care CEO Steve Atkins.

Australian-based private equity firm Pacific Equity Partners is understood to have hired Macquarie Capital for a potential purchase of the acute hospitals within the Luye Medical Group-owned Healthe Care business, estimated to be worth about $600m.

China’s Luye has hired investment bank JPMorgan for a sale of the hospitals while at the same time attempting to float the remaining parts of Healthe Care, which includes mental health and rehabilitation assets.

Healthe Care is Australia’s third largest private hospital operator.

The understanding is that the information memorandum for the sale is with prospective suitors, and a wide number of parties have been approached, ranging from not-for-profit groups to strategic parties and private equity firms.

However, sources say that PEP is already firming as a strong candidate to buy the portfolio.

This is given that it has aspirations to grow its Evolution Healthcare business that consists of a number of regional hospitals based in New Zealand.

Some think that PEP could be bulking up the Evolution Healthcare business ahead of a sale or listing that may happen by late this year at the earliest.

PEP purchased Evolution Healthcare in March 2019 for a price thought to be about $300m.

The buyout fund describes the business as a leading provider of private hospitals and rehabilitation services in New Zealand and Australia.

PEP and The Carlyle Group also own iNova Pharmaceuticals, which the pair purchased in 2017 for $930m from US-based Valeant and may also come up on offer.

Luye was understood to have been fielding offers from buyers for Healthe Care last year and has issued IMs after sending out promotional material for a sale of its acute care hospitals in recent weeks.

Market experts say that the most attractive hospitals in the portfolio are its Lingard and Gosford private hospitals in NSW.

Other possible buyers could be the mutual company Australian Unity, Ramsay Health Care or Brookfield, which owns the second largest private hospital operator Healthscope.

However, Ramsay and the Brookfield-owned Healthscope could face competition issues, particularly for Healthscope around the Gosford hospital, given it owns a hospital in Newcastle.

Healthscope would also likely be deterred by the fact that the real estate for the hospitals is owned by other parties, including Australian Unity and Northwest Healthcare Properties.

So far, the understanding is that for many potential buyers there are parts of the acute hospital portfolio that would be highly attractive, which could trigger the formation of consortia to line up for the business.

However, the less profitable parts of the portfolio could be a deterrent for some prospective suitors.

Luye Medical purchased Healthe Care from Archer Capital in 2015 for $938m and it was established in 2005 by Ben Thyne, who now runs PEP’s Evolution Healthcare.

When Luye purchased Healthe Care it fought off competition from Bain Capital and Baring Private Equity so it will be interesting to see if they are around the hoop this time.

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.

Crescent Capital is also floating its Australian Clinical Labs business through Bank of America and Goldman Sachs.