TPG Capital & Pacific Equity Partners out of Healius diagnostic imaging contest, points to Affinity as winner

Healius has been running an auction for its diagnostic imaging business through investment bank UBS. Picture: iStock.

TPG Capital and Pacific Equity Partners were both out of the contest to buy Lumus Imaging from Healius at the weekend, pointing to Affinity Equity Partners as the winner in a deal thought to be worth at least $700m.

It comes after final bids were received from three suitors on Wednesday.

In what is understood to be a closely fought out contest advised by UBS, the final contenders were TPG Capital, Affinity Equity Partners and Pacific Equity Partners.

TPG Capital was considered the favourite int the competition from the start, but Affinity was understood to have put forward a strong final offer.

Offers in the contest’s first round were only a few percentage points apart from each other.

It is understood that the asking price by Healius was $700m excluding costs or on a net basis, but on a gross basis, it could be close to $800m.

The asking price is understood to equate to about 10 times its annual earnings before interest, tax, depreciation and amortisation forecast of about $70m.

PEP, which owns private hospital operator Healthe Care, was advised by Bank of America and Stanton Road Partners.

Healius, with a $1.2bn market value, is selling its Lumus Imaging unit to drive down its debt and fund its pathology arm, despite the imaging operation being the stronger performer.

Private equity is drawn to the space by the opportunities to create further earnings upside through artificial intelligence.

Lumus Imaging is the nation’s third-largest diagnostic imaging operation behind Sonic and Permira’s I-MED, which is also for sale.

Healius shares closed at $1.67 on Friday.

Next off the block was expected to be I-Med, the country’s largest diagnostic imaging business.

However, some think it may soon be applying the brakes to the sale process.

The understanding is that I-Med’s owners have received indicative offers for the business, but some suspect they may have fallen short of its $3bn-plus asking price.

There’s some chatter that parties that want to take a look will be offered information, but the sale process is no longer on foot.

Earlier, among the groups understood to be showing interest were Wesfarmers, Macquarie Asset Management, Partners Group, Bain Capital and The Carlyle Group.

Morgan Stanley Infrastructure Partners had shown interest at the start of the year.

Earlier, it was expected that the sale process would ramp up at the end of this month following the conclusion of the Lumus Imaging sale that is part of Healius.

DataRoom revealed that Morgan Stanley was poised to be hired to sell I-MED, and Jefferies Australia was later added to the ticket.

I-MED is understood to be forecast to generate about $250m of earnings before interest, tax, depreciation and amortisation, but some have questioned whether it would hit its earnings forecasts.

Permira purchased I-MED in 2018 for $1.3bn, or 11 times its earnings from EQT.

It has more than 230 clinics across Australia.

In 2021, market analysts suspected that I-MED could sell for about 14 times its EBITDA, but it’s now a different market where diagnostic imaging, like all areas of the healthcare industry, has been working hard to get costs down and increase earnings.