Wesfarmers and Brookfield eye cancer care provider Icon Group
Icon operates 30 cancer care centres across Australia, delivering a mix of radiation therapy, chemotherapy and blood-disorder treatment for patients. Picture: iStock
Global buyout fund Brookfield and Perth-based conglomerate Wesfarmers are believed to be among the parties lining up to consider a potential acquisition of the nation’s largest cancer care provider, Icon Group.
The two companies have been identified by investment banking sources as being in the mix when the auction gets under way in either July or August.
A decision on when the starting gun will be fired on the process is expected soon.
Other groups lining up to buy Icon Group are thought to be Canadian pension funds and New Zealand infrastructure investor Morrison & Co.
Australian pension funds are still believed to be weighing up their options with respect to the competition.
The $66.6bn Wesfarmers has considered acquisitions in the healthcare sector in the past, once weighing up an acquisition of the nation’s second-largest hospital operator Healthscope, which was bought by Brookfield in 2019 in an on-market contest with BGH Capital for $4.4bn.
Brookfield, meanwhile, has been acquisitive in the healthcare sector of late, recently lining up among the bidders for Healthe Care’s acute-care hospitals that were recently up for sale through JPMorgan. As revealed by DataRoom, Icon Group has been placed on the market by its owners and has hired investment banks for a sale.
Goldman Sachs, which owns a stake in the business, is on the ticket, along with Jefferies Australia.
Initially, the plan was to consider a dual-track process where both a float and an initial public offering were being considered.
However, the thinking is that a sale is now the sole focus, given that a strong degree of confidence exists that buyers will pay up for the business.
Expectations are that buyers will outlay more than $2bn for the healthcare provider, which generates about $160m in annual earnings before interest, tax, depreciation and amortisation.
Icon, which is chaired by Sonic Healthcare chairman Mark Compton, was sold by Quadrant Private Equity in 2017 to a consortium including Queensland Investment Corporation, Goldman Sachs Private Equity and China’s Pagoda Investments for $1.2bn.
It operates 30 cancer care centres across Australia, delivering a mix of radiation therapy, chemotherapy and blood-disorder treatment for patients.
It also operates through Asia and in New Zealand, successfully rolling out its growth strategy in China, where it has about six sites.
The understanding is that annual earnings before interest, tax, depreciation and amortisation of the business have since doubled from the time it was purchased in 2017, when it was making about $80m.
The sale of Icon comes at a time when healthcare businesses remain in strong demand by private equity investors.
This month, Pacific Equity Partners purchased Healthe Care’s acute-care hospitals from China’s Luye for just over $400m, as first flagged by DataRoom on June 9.
PEP is also selling its New Zealand hospital owner, Evolution Healthcare, through Stanton Road Partners, as also revealed by this column.
PEP purchased Evolution Healthcare in March 2019, reportedly for about $300m.
One of the groups expected to be interested in buying that business is Canada’s Ontario Teachers Pension Plan after it purchased Healthscope’s New Zealand pathology business last year with the NZ Super Fund, while Brookfield and Australian private hospital giant Ramsay will also probably take a look.
The business is expected to be for sale for a price equating to about 17 times the group’s earnings before interest, tax, depreciation and amortisation.
Last year, Quadrant Private Equity achieved a strong price for the sale of its Qscan Radiology Clinics business, which was picked up by Infratil and Morrison & Co for $735m.
WES Price at posting:
$58.12 Sentiment: None Disclosure: Held
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