Quadrant Private Equity, Adamantem Capital and Bain Capital are among a handful of private equity firms believed to have shown interest in an acquisition of the $800m Healius diagnostic imaging unit, which is expected to be put up for sale by the healthcare provider next month.
Healius was believed to be preparing to announce the outcome of its strategic review in May, but this is likely to be pushed into next month.
Apparently there is internal division as to whether to move forward right now with a Diagnostic Imaging sale, and sources suggest that John Wylie, whose Tanarra Capital owns about 6 per cent, is still uncertain about the best way to proceed.
A sale is likely to yield a price of $700m to $800m, but it would come at a time when a number of buyout funds have been burnt by paying too much for healthcare assets in previous years and the healthcare industry is at a weak point.
However, most expect that Healius will ultimately run a sale process to test market interest and then determine whether to divest the division.
DataRoom understands that a handful of parties have expressed interest in an acquisition of the Healius unit, with Australia-based funds such as Quadrant Private Equity and Adamantem Capital known to be interested buyers.
Bain Capital last year purchased aged care provider Estia Health for $838m, while Quadrant made a windfall in the sale of its Qscan diagnostic imaging business in 2020 to Morrison & Co for $735m, including debt, and Adamantem owns Zenitas community health business and Heritage Lifestyle aged care.
Pacific Equity Partners would be another logical suitor.
It comes after Healius announced in March that it would start a wide-ranging strategic review of its structure and assets. Sources believe UBS is preparing the business for a possible sale process, to launch within weeks.
Healius’s directors were due to meet to sign off on the move recently.
Healius recently said that the strategic review, led by newly appointed boss Paul Anderson, was aimed at “maximising shareholder value” in a changing diagnostics market and would be undertaken in conjunction with the ongoing pathology “Transformation Reset Program”.
It would be run concurrently with finding greater efficiencies in the business.
Healthcare providers have been struggling under challenging conditions, with staff shortages and higher costs.
Debt has compounded the challenges for Healius.
In a note released on May 15 Morgan Stanley analysts said that the increase of debt covenants as part of a refinancing could suggest a worsening of operating conditions, assuming $296m of net debt.
They said 4.5 times earnings before interest, tax, depreciation and amortisation covenant implied EBITDA of $320m versus guidance of between $359m and $369m.
In November last year, Healius raised $187m through Barrenjoey after facing pressure from its lenders, who waived a covenant.
It raised at $1.20 a share, a steep 34.6 per cent discount to its last traded price of $1.84.
Shares on Friday were trading at $1.32, with its market value at $955m.
Debt became an issue after it used proceeds from the sale of its primary healthcare business to buy Agilex Biolabs for $301m in 2021.
There has been mounting speculation for some time that a sale of Healius’s diagnostic imaging or some assets in that unit could be on the agenda.
Diagnostic imaging is considered a superior performer among the Healius operations.
Lumus Imaging generated $45.6m of EBITDA for the six months to December, while pathology generated $119.4m.
For the six months to February, Healius generated a $9m loss.
The company is expected to release a profit downgrade.
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