TPG and Carlyle to pay $2.7b for Healthscope
TPG and Carlyle will pay Healthscope $2.7 billion, the largest takeover offer for from a private equity concern in more than four years, for Australia's second-largest hospital owner.
Healthscope directors declared yesterday that they unanimously recommend that shareholders accept a $6.26 per share cash bid from the consortium after a three-month process. The offer is 16 per cent higher than Healthscope's Friday closing price of $5.40.
The size of the takeover sum compares to the Carlyle-Kerry Stokes $2.9 billion offer for building materials company Coates Hire in 2007 and CVC Capital Partners' $2.7 billion bid for diagnostic imaging and residential aged-care company DCA Group in 2006.
With the market reacting positively to the negotiation entered into by the private hospital operator, Healthscope shares closed at $5.94, up 54¢, or 10 per cent yesterday.
Pitched at $1.99 billion plus debt of $700 million, the offer values Healthscope at $2.7 billion and is equal to a forward enterprise value/earnings before interest, tax, depreciation and amortisation multiple of about 10 times.
Welcoming the TPG-Carlyle offer price, Healthcare analysts yesterday said this is a fair deal for shareholders, with the most bullish breakup approximates for Healthscope reaching as high as $6.50 per share.
''We agree with the Healthscope board that shareholders should accept this offer,'' said Citi analyst Alex Smith.
''To justify the offer price, we would need to adopt a highly optimistic scenario in terms of sustainable margin expansion in the hospital division, sustainable and profitable market share gains in pathology, and significant cost reductions.
''In our view, these will be difficult to achieve in practice. Hence, we are highly supportive of accepting the offer.''
According to Mr Smith, ''The offer shows that private equity is back and that leveraged financing is available in the right circumstances.
''We expect, therefore, that the healthcare stocks with depressed share prices are probably getting some attention, though it remains to be seen if anything will transpire.''