Australia’s Healthscope recommends $1.72 billion takeover offer from Carlyle and TPG Capital

Healthscope recommends Carlyle, TPG takeover bid

SYDNEY — Healthscope Ltd., Australia’s second-largest private hospital operator, said Monday its board has unanimously recommended a 2 billion Australian dollar ($1.72 billion) takeover offer from U.S. private equity firms Carlyle Group and TPG Capital.

Healthscope operates 44 private hospitals and has pathology facilities in Australia, New Zealand, Singapore and Malaysia. Carlyle and TPG have offered AU$6.26 a share for Healthscope, which the Melbourne-based company said represents a 39 percent premium to its AU$4.50 share price of May 13 — the day before the company said it had received a proposal.

Based on the company’s 317 million shares outstanding, the purchase price would total about 1.98 billion Australian dollars ($1.72 billion). Including debt, the company values the deal at 2.7 billion Australian dollars ($2.3 billion).

On Monday, Healthscope shares rose 10 percent to close at AU$5.94.

“Whilst the board is of the strong belief that the company is well positioned to continue to deliver strong growth for shareholders into the future, the board determined that the relative certainty delivered by this cash offer at a substantial premium was in the best interests of Healthscope shareholders,” Healthscope Chairman Linda Nicholls said in a statement.

Healthscope said the offer price would be reduced by any future dividends it pays to shareholders before the deal is complete. The transaction still requires Healthscope shareholder, court and other regulatory approvals.

The agreement ends a bidding process that had included multiple companies.

Healthscope said May 14 that a private equity consortium had offered A$5.50 per share for the company, and days later that bid was upped to A$5.75 per share. By the end of the month, Healthscope had received two additional offers, each totaling A$5.80 per share.

Media reports have identified one of the offers as having been from U.S. private equity firm Kohlberg Kravis Roberts & Co. U.S. hospital operator Tenet Healthcare Corp. in June dropped out of the bidding after it said information about its discussions with Healthscope was made public prematurely and caused its share price to tumble.

The deal is the latest move by private equity firms into the hospital business.

Private equity firm BC Partners and technology investor Silver Lake earlier this month agreed to acquire healthcare cost management company MultiPlan Inc. in a deal reportedly worth $3.1 billion. They bought the New York-based company, which serves insurers and health plan administrators, from Carlyle Group and Welsh, Carson, Anderson & Stowe.

New York-based Cerberus Capital Management agreed in March to pay $830 million for Catholic hospital operator Caritas Christi Health System, the second-largest hospital chain in Massachusetts. And hospital chain HCA Inc. in May announced plans to raise $4.6 billion in its third initial public offering of common stock, more than three years after it was taken private in a $21 billion leveraged buyout by Bain Capital, Kohlberg Kravis Roberts and Merrill Lynch Global Private Equity.

Healthscope is being advised by Goldman Sachs JBWere, Lazard and Minter Ellison.