Malaysia’s IHH Mulls Bid for Australia’s Healthscope

Malaysia’s IHH Mulls Bid for Australia’s Healthscope

Deal for Hospital Company, Put on the Block by TPG and Carlyle Group, Could Be Worth $5 Billion

CYNTHIA KOONS, GILLIAN TAN and P.R. VENKAT

March 10, 2014 6:31 a.m. ET

Malaysia’s IHH Healthcare 5225.KU -1.31% Bhd. is considering a bid for Australia’s Healthscope, a hospital and pathology company put on the block by private-equity owners TPG Capital and Carlyle Group CG -0.96% LP in a deal that could be worth $5 billion, people familiar with the matter said.

A sale to a strategic buyer is just one possibility, people familiar with the sale process said. TPG and Carlyle are also considering an initial public offering of the hospital operator, or they could sell Healthscope’s property and hospital divisions separately. Bids are due in April, one of the people said.

IHH Healthcare hasn’t decided whether it will bid for the assets, one of the people said. IHH, which is majority-owned by Malaysia’s sovereign-wealth fund Khazanah Nasional Bhd., has been bulking up in the health-care sector in recent years, hoping to capitalize on growing demand for such services both in Southeast Asia and outside the region.

In 2010, it acquired Parkway Holdings Ltd., in a deal that valued the Singaporean health-care company at $3.5 billion. A year later, IHH spent close to US$1.7 billion amassing a stake in Turkish hospital group Acibadem. IHH has also been building up its war chest to fund additional acquisitions. In 2012, the company raised more than $2 billion from an initial public offering of its hospital assets, including its Singapore and Turkey hospitals, through a dual-listing in Malaysia and Singapore. It was one of the biggest listings in Malaysia in recent history.

IHH said it is still looking for new investments, though it wouldn’t comment on Healthscope.

“IHH is always looking at various value-accretive opportunities to add to its portfolio,” a spokeswoman said. “However, it is not appropriate for us to comment on specific transactions, and we will update the market if there are any material developments.”

Healthscope is one of the largest hospital and pathology companies in Australia. It has 33 hospitals, four mental-health hospitals and four rehabilitation facilities. Healthscope also operates pathology businesses in New Zealand, Malaysia, Singapore and Vietnam.

TPG and Carlyle are also actively exploring an initial public offering of Healthscope. The firms have appointed Macquarie and UBS to run a potential listing while Bank of America, Credit Suisse and Goldman Sachs are also working on a deal, a person familiar with the matter said. The hospital company’s management is talking to potential cornerstone investors in Asia, the Middle East and the U.S. for a listing that would value the company at $5 billion, including $1 billion in debt, a person familiar with the situation said.

The private-equity firms would likely hold on to at least 25% of the company if they pursue a listing, one person said. TPG and Carlyle are also considering selling just a portion of their stakes in Healthscope to sovereign-wealth funds, one person familiar with the situation said.

TPG and Carlyle bought Healthscope for about $1.7 billion in 2010, beating out a rival offer from Kohlberg Kravis Roberts & Co. Strategic buyers such as Dallas, Texas-based Tenet Healthcare Corp. THC -2.09% also considered bids at the time, but backed out due to volatility in the company’s stock after their interest in Healthscope was widely reported.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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