Radiology firm Capitol Health targeted by Viburnum Funds THE...

Radiology firm Capitol Health targeted by Viburnum Funds

• THE AUSTRALIAN

Embattled radiology group Capitol Health is in the crosshairs of Perth-based venture capital and private equity firm Viburnum Funds after the company’s shares cratered in the wake of government intervention into the sector and a string of poor earnings results.

It is understood Viburnum, which holds a 21.3 per cent stake in Pulse Health, has run the numbers on the business although it’s unclear whether the specialist investor intends to have a tilt at Capitol or acquire a large foothold on the register and militate as an activist investor.
Viburnum has form in this area. The fund hoovered up large positions in both Pulse and Vision Eye and then campaigned last year for a $162m merger between the private hospital operator and the ophthalmic care provider.
Its efforts were trumped by an unexpected $198m all-cash offer for Vision from China’s Jangho Group.
Capitol Health’s precipitous share price slide over the past year has rendered it low-hanging fruit for prospective predators. Since the stock hit a peak of $1.09 in April 2015, its shares have tumbled to 14c, reducing its market cap to $73m.
However, its takeover appeal is likely to be hampered by a near $100m debt load, amassed chiefly to fund the acquisitions of imaging centres.
The same issues bedevil larger players like Primary Health Care, which has long been mooted as a potential target. It, too, is burdened by a heavy debt load (close to $1 billion) and has been hit hard by government cuts to pathology services. The sector malaise is also souring Integral Diagnostics’ valuation, driving its share price to fresh lows.
Fund manager Perpetual holds a 10 per cent stake in the company, which debuted on disallowed last year at $1.91 per share. It closed yesterday at $1.45.