Private equity winning contest for cancer care provider Icon Group

Icon Group has 30 cancer care centres across Australia, delivering a mix of radiation therapy, chemotherapy and blood-disorder treatments.

Private equity firms are starting to grab the upper hand in the competition for the country’s largest cancer care provider Icon Group, with suggestions that infrastructure funds are cooling on the $2bn opportunity.

After initially carrying out work on Icon, the understanding is that they are less enthusiastic about paying up for the asset that they were initially drawn to due to its “core plus” status of a business that resembles an infrastructure asset in a number of ways.

DataRoom can reveal that British private equiteer Permira is understood to be entering the contest. But sources believe that so far the strongest contender for Icon is the buyout fund Baring Private Equity Asia.

Permira is the owner of the country’s largest diagnostic imaging business I-MED, which many suspect will soon come up for sale. Baring, which has $US23bn of assets under management, has invested in a number of companies in the healthcare technology space.

Two other private equity bidders are EQT, advised by Morgan Stanley, and Brookfield.

Infrastructure investors said to be keen on the asset early on have included Morrison & Co, which has had Royal Bank of Canada as an adviser, Singapore’s Keppel Corp, the Singapore sovereign wealth fund GIC, Stonepeak Infrastructure Partners, and from Canada pension funds OMERS and Ontario Teachers’ Pension Plan.

Information memorandums were out for Icon at the end of July and interested parties are now scrutinising the business, with bids due next month. Working on the sales process are Goldman Sachs and Jefferies.

Icon generates about $160m in annual earnings before interest, tax, depreciation and amortisation.

It will be interesting to see if Sonic Healthcare lines up to buy the business, given it indicated during its results presentation that it has $1.5bn of dry powder for acquisitions. The thinking is that it would most likely partner with another group.

Sonic is the largest provider of laboratory medicine and pathology in Australia, Germany and Switzerland and is chaired by Icon’s chair Mark Compton.

Companies like Sonic, that have seen earnings soar on the back of surging demand for Covid-19 testing, are said to be looking for acquisition opportunities to diversify.

Icon Group was sold by Quadrant Private Equity in 2017 to a consortium including Queensland Investment Corp, Goldman Sachs Private Equity and China’s Pagoda Investments for $1.2bn. It has 30 cancer care centres across Australia, delivering a mix of radiation therapy, chemotherapy and blood-disorder treatments.

The understanding is that annual EBITDA of the business have doubled since it was purchased in 2017, when it was making about $80m.