PEP hires bank for Evolution sale as it finalises Healthe Care deal

Pacific Equity Partners is selling its New Zealand hospitals business Evolution Healthcare.

Pacific Equity Partners is understood to have hired Stanton Road Partners to sell its New Zealand hospitals business Evolution Healthcare, as it firms as the winner of the contest to buy Healthe Care’s portfolio of hospitals in Australia.

PEP is believed to be in final negotiations to acquire the Healthe Care portfolio of about 12 acute care hospitals and some Day Centres from China’s Luye, which were earlier expected to fetch about $400m.

Sources said on Wednesday when DataRoom revealed PEP as the winner, that the price was still being finalised.

The Australian-based private equity firm has been working with Macquarie Capital and is understood to have fought off competition from Crescent Capital and Brookfield to win the JPMorgan-advised contest.

Earlier, Ramsay Health Care mulled the acquisition of at least one hospital in the portfolio but as expected, was not in the final mix.

Ramsay is busy finalising the purchase the London-listed Spire Healthcare Group for $3.7bn.

It is understood that some other parties put in offers below $400m, with the rental agreements on the hospitals said to be a key focus of negotiations.

The portfolio was forecast to generate $41m of annual earnings before interest, tax, depreciation and amortisation.

Healthe Care is Australia’s third largest private hospital operator and Luye Medical bought the business from Archer Capital in 2015 for $938m.

It was established in 2005 by Ben Thynne, who now sits on the board of PEP’s Evolution Healthcare and acts as an adviser.

Luye also considered a float of the remaining part of the Healthe Care business, consisting mainly of 25 mental health rehabilitation assets, but shelved the deal when equity investors were not prepared to pay a price that gave the offering an $800m equity value, equating to 19.7 times its net profit.

The understanding is that one of the assets in that portfolio – the Brisbane Waters Private Hospital – has also been sold to PEP in the latest deal.

It has been selling assets to pay down debt owed to Goldman Sachs.

PEP is believed to be finalising a deal to buy the Healthe Care assets as it moves to sell its own Evolution Healthcare business that consists of a number of regional hospitals based in New Zealand.

PEP purchased Evolution Healthcare, also founded by Mr Thynne in March 2019 for a price thought to be about $300m.

As earlier reported by DataRoom, a sale of Evolution. which counts former Virtus Health boss Sue Channon as its chief executive, was thought to be on the agenda this year.

The buyout fund describes the business as a leading provider of private hospitals and rehabilitation services in New Zealand and Australia, with the Wakefield Hospital in Wellington its most valuable asset.

Healthcare assets remain in strong demand by buyout funds, attracted to the industry’s low risk profile amid a low interest rate environment.

Stanton Road Partners is headed by former Morgan Stanley and Luminis Partners banker Peter Brownie and last year worked with Quadrant Private Equity selling its Qscan Radiology Clinics business to a Morrison & Co-led consortium for a price that values the business including debt at $735m.

It is also advising Quadrant on the up-coming sale of its Superior Food Services business, has worked on the float of Next Capital’s flowers business Lynch Group and is currently advising on the sale of education business Affinity Education for Anchorage Capital Partners.