Healthe Care sold to China’s Luye Medical
The Sydney Morning Herald – 6 December 2015
Australia’s third largest private hospital operator, Healthe Care, has fetched $938 million in a sale to China’s Luye Medical Group.
Healthe Care issued a statement on Sunday, confirming a report published by the Australian Financial Review’s Street Talk Online on Friday evening that majority owner private equity firm Archer Capital had sold it to Luye Medical.
The value of the private sale was not disclosed in the statement, but the Financial Review has confirmed the Chinese buyer beat private equity suitors Baring Private Equity Asia and Bain Capital with a final bid of $938 million. The deal had been pitched in the range of $900 million to $1 billion.
Healthe Care chief executive Steve Atkins, a founding shareholder, said the deal sets the company up to build more hospitals in Australia and expand into China.
“Luye Medical have brought into the growth plan that we pitched to them,” he said.
“The immediate aspiration is to open at least another two or three new hospitals over the next five years, and enter a range of public private partnerships at existing state run sites”.
Luye Medical is a part of the multibillion-dollar privately owned Luye Group, which floated its $4 billion Luye Pharma Group on the Hong Kong Stock Exchange last year.
The deal is Luye’s first foray as a hospital owner anywhere in the world, and positions it to enter the emerging market for private hospitals to service China’s booming middle class.
“I strongly believe that Healthe Care will provide us with a platform upon which we can build a world class and highly successful healthcare services business not only in Australia and China, but also in many other countries of Asia,” Luye Group chairman Liu Dian Bo said.
“This positions Luye Medical to consider a range of opportunities resulting from the recent free trade agreement with China, and capitalise on the company’s world class systems, patient care and operating standards”.
Mr Liu said his company was committed to supporting local standards of care.
“I see our role as to enhance and improve access to private healthcare services for Australians and we have the capital and commitment to fund expansion of Healthe Care’s hospitals to enable it to continue to bolster its position as one of the leading healthcare services companies in the country”.
Mr Atkins welcomed the new owners. “After two private equity owners it is exciting to enter the next stage of the company’s growth with a longer term owner that really understands the healthcare market,” he said.
Archer Capital’s $400m payday
Healthe Care was founded in 2004 with the backing of CHAMP Ventures, which sold its stake to Archer Capital for $230 million in 2011.
It owns and operates 17 private hospitals across the country. The group has nearly 2000 hospital beds, 50 operating theatres, 4500 employees, and posts annual revenue of about $500 million.
Five sites were added to the group under Archer Capital’s watch, including Hurstville Private in Sydney and the newly opened Townsville Private. A new hospital on the Gold Coast is scheduled to open mid-2016.
Archer Capital poured $278 million into Healthe Care’s capital investment program, adding 2000 employees to the group.
That investment has yielded a $430 million return on the sale price.
Mr Atkins and at least a dozen other executives have retained an undisclosed shareholding under the new owners.
Healthe Care is now the third-largest private hospital group behind ASX-listed players Ramsay Health Care and Healthscope.
The sale to the Luye Group is subject to final approval from the Foreign Investment Review Board.
Mr Atkins said he saw no impediment to regulatory approval given the large number of public and private hospital operators competing in the market.
Archer Capital was advised by Luminis Partners, Morgan Stanley and Allens. Luye Medical was advised by Barclays and Ashurst. Completion of the transaction is expected in the first quarter of 2016.