Affinity beats TPG Capital, Pacific Equity Partners to win Healius diagnostic imaging contest

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

TPG Capital and Pacific Equity Partners are out of the race to buy Lumus Imaging from Healius at the weekend, leaving Affinity Equity Partners as the winner in a deal thought to be worth at least $750m.

Final bids in the hard-fought contest, advised by UBS, were received on Wednesday.

Affinity Equity Partners was advised by Allier Capital.

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

TPG Capital was considered the favourite at 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 Healius’s asking price was $700m, excluding costs, but close to $800m on a gross basis.

That equates to about 10 times forecast annual earnings before interest, tax, depreciation and amortisation of about $70m.

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

Private equity has been drawn to the space because of the opportunities to use artificial intelligence to boost earnings.

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 could be I-Med, the country’s largest diagnostic imaging business, but there are sceptics.

The understanding is that I-Med’s owners have received indicative offers for the business, but some suspect they have fallen short of the $3bn-plus asking price. There’s some chatter that suitors that want to take a look will be offered information, but the sale process is no longer on foot.

Wesfarmers, Macquarie Asset Management, Partners Group, Bain Capital, The Carlyle Group and Morgan Stanley Infrastructure Partners have shown interest.

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. 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 forecast to generate about $250m of earnings before interest, tax, depreciation and amortisation.

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 with cost pressures.