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Dec 2022 - Jan 2023
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PE Panorama: Healthscope bid is a rinse and repeat by PE

Even as the Antipodean autumn slides towards winter, there are signs of sappy vigour in the Australian buyout market. Newcomer private equity (PE) firm BGH Capital has created a stir by launching a A$4.11 billion (US$3.1 billion) unsolicited takeover and privatisation bid for listed private healthcare giant Healthscope Ltd., in partnership with pension fund AustralianSuper, the Ontario Teachers’ Pension Plan Board (OTPPB), and others. According to Healthscope’s announcement to the Australian Securities Exchange (ASX), the offer was at a 16% premium to the company’s most recent close.

An ASX notice from the buyout consortium indicates that BGH Capital already has a 14.5% voting stake in Healthscope, with co-investors OTPPB, the Canada Pension Plan Investment Board, and Singapore sovereign wealth fund GIC. And Healthscope’s ASX announcement says AustralianSuper currently has an approximately 14% shareholding in the company.

According to BGH Capital’s website, it was established last year by Robin Bishop, Ben Gray and Simon Harle “with the objective of creating the pre-eminent private equity firm in Australia and New Zealand”. Mr. Gray was previously a managing partner at TPG Capital, where he served as the joint head of Asia, the head of Australia and New Zealand – and led its prior investment in Healthscope, alongside Mr. Harle, who was also then a partner at the company. Mr. Bishop, meanwhile, was head of Macquarie Capital, Australia and New Zealand.

Why my scepticism? Well, as per Healthscope’s own website, in October 2010, it was acquired by a consortium of funds, advised and managed by TPG Capital and The Carlyle Group, and was subsequently de-listed from the ASX. Following a period of successful growth under private ownership, it was re-listed on the ASX in July 2014. Although Bloomberg notes that Healthscope shares have dropped 35% from a September 2016 high, the BGH Capital-led consortium’s bid appears to already have undone some of that damage, pushing the shares up 16% and matching the offered premium.

Some commentators already appear underwhelmed by the bid. The Motley Fool financial website points out that Healthscope’s shares were trading over the offer price just over a year ago. Meanwhile, Australian media has been full of critical comment on government measures raising health insurance premiums. The Roy Morgan Research Institute released a report in March declaring that “private health insurance is more distrusted than it is trusted by Australians”.

You could well make out a case that Healthscope’s stock performance woes are due to transient external factors, rather than anything that can be fixed within its own operations. Meanwhile, BGH Capital and its co-investors appear to have concluded that the remedy for Healthscope’s ills after its PE owners took it public is… more PE ownership. Ladies and gentlemen, your very good health.