The last suitors left in the running for the $700m Healius diagnostic imaging business are putting the finishing touches on their final offers, which are understood to be due next week.
The binding bids come after weeks of due diligence carried out on the company by interested groups, with TPG Capital shaping up as being in the box seat to win the auction.
TPG Capital, which last year privatised funeral services operator InvoCare, has been competing against Pacific Equity Partners.
While suitors were told Affinity Equity Partners put forward a final offer before due diligence in the last round of the UBS-run contest, various market sources have said it is no longer in the mix.
The asking price is $700m net, and the challenge for TPG is getting comfortable that it is not overpaying for the asset that has its challenges, including reasonable capital investment needs.
It is understood to equate to about 10 times its earnings before interest, tax, depreciation and amortisation.
While PEP, advised by Bank of America and Stanton Road Partners, is known to be keen on the business known as Lumus Imaging and has been carrying out work, its challenge is that it also owns hospitals as part of its Healthe Care business, which can be tricky when also owning radiology assets at the same time from a contract perspective.
Healius 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.
Bankers at Morgan Stanley and Jefferies are getting ready to start that auction at the conclusion of the Healius competition.
So far, Macquarie Asset Management seems to be the most motivated buyer of I-MED, which is likely to have a $3bn-plus price tag, while Wesfarmers and Bain Capital are also in the mix.
Morgan Stanley Infrastructure Partners showed keen interest at the start of the year after some early introductory meetings were held, and while all the other big name sponsor groups will be in the data room taking a look, most think that the business will be taken out by an infrastructure investor, which has a cheaper cost of capital.
It’s been a busy time in healthcare for deals, with Genesis Capital and Crescent Capital also recently battling it out to buy listed dental care chain Pacific Smiles, and Crescent Capital on Wednesday night selling out of Australian Clinical Labs, pocketing about $200m.
Crescent’s managing founder Michael Alscher, who is also ACL’s chairman, has been a motivated seller for some time after Crescent floated the business at $4 a share in 2021, with its bid last year to merge with Healius thought to create an opportunity for an exit.
The 30 per cent remaining stake was sold at $3.20 per share through E&P Capital.
The stock’s rallied strongly to $3.33 from $2.60 a month ago, so no doubt Crescent saw it as an opportune time to take some money off the table.
It’s now completely out of the stock after selling 14.3 per cent in 2022 through Goldman Sachs at $4.50 per share.
ACL shares closed 1.5 per cent higher at $3.38 on Thursday.
Goldman Sachs well placed with Real Pet Food sale imminent
Investment bankers have recently entered a beauty parade in the hope of landing the job of selling the pet food company.
KKR weighing up $8bn office landlord Dexus
Blackstone made another bid for the real estate and infrastructure group last year, and now its major private equity rival is said to have been looking.