Private equity interest in Healius cools as rising valuation spoils deal

Healius is the second largest pathology player behind Sonic Healthcare, with 25 per cent market share and ACL the third largest.

A recovery in recent weeks in the share price of Healius has seen interested private equity buyers put their pens down for now, taking a view the company no longer represented good value.

DataRoom understands that parties were interested in buying the business when the share price was trading at around 70c, paying about $1 per share for the target, which would be in line with the typical 30 per cent premium.

But at 94c, where Healius closed at on Thursday, a suitor would need to pay over $1.20 per share to make it a 30 per cent premium, a price that some deem too much.

A number of groups have run the ruler over Healius in recent years, with sources suggesting that Bain Capital may be eyeing up the pathology provider as a prospect.

Boston-based Bain is a prolific buyer of businesses in Australia, particularly those in the healthcare space.

It considered an acquisition of the Healius diagnostic imaging division before it was sold to Affinity Equity Partners.

The $540m Healius business, like other industry operators, is facing headwinds in the form of higher costs. And many private equity firms are sitting on the sidelines for buyouts for that reason for the time being.

But over time, healthcare assets have been attractive to the industry.

Should a group in fact come forward with an offer, much of its success will rest on the views of John Wylie, whose Tanarra Capital owns 19.8 per cent.

Mr Wylie recently lifted his interest, leaving some to question whether that could be to prevent a private equity firm buying the business at a low value.

One of Mr Wylie’s Tanarra Capital executives, Chris Hall, recently joined the board.

He almost doubled his holding, and he’s told sources around the market that he made the move because he saw good value in the stock.

Mr Wylie is known to have played matchmaker many times before, such as with Boral, and has made attempts to find a solution for Lendlease, another of his investments.

Before being a fund manager, he was a high-profile investment banker in Australia, running Lazard’s Australian outpost.

Most believe that the obvious deal is bringing together Australian Clinical Labs and Healius to capitalise on synergies, but boardroom politics is said to be standing in the way.

While there are concerns the Australian Competition and Consumer Commission may block a deal, it could potentially gain clearance by selling assets in certain markets.

Australian Clinical Labs had aspirations of buying Healius in the past, but came up against fierce opposition from the target.

And Healius has been a perennial takeover target for private equity.

Healius reported a $151m loss compared to a $646m loss in the previous corresponding year.

It is the second largest pathology player behind Sonic Healthcare, with 25 per cent market share and ACL the third largest.