Permira to buy Australia's I-Med from EQT

The size of the transaction is approximately A$1.3 billion ($1 billion), according to a source close to the situation. The sale, which is expected to close before the end of March, caps a significant turnaround for I-Med, which was taken over by creditors in 2011 before being sold to EQT three years later.

The company claims to be Australia’s leading provider of diagnostic imaging services – such as x-ray, MRI and ultrasound – performing almost five million procedures a year across a network of 204 clinics. It employs more than 3,500 people, including over 300 radiologists, and generated nearly A$700 million in revenue for the 2017 financial year.

I-Med entered private equity ownership in 2006 when CVC Capital Partners acquired its parent, DCA Group, for A$2.7 billion (then $2.1 billion). It was one of numerous aggressively priced leveraged buyouts in Australia ahead of the global financial crisis, and after DCA’s aged care business was sold to BUPA for A$1.23 billion in 2007, I-Med was left carrying a A$900 million debt load.

A 25-strong group of investors led by Anchorage Capital and Fortis Investment subsequently took control of the near-bankrupt I-Med through a debt-for-equity swap. With one-third of the company’s doctors looking to leave, Allegro Funds was brought in to stabilize operations, leading a A$240 million corporate restructuring and refinancing.

EQT acquired I-Med alongside co-investors Caisse de dépôt et placement du Québec of Canada (CDPQ) and Singapore’s GIC Private in deal said to be worth around A$400 million. It was EQT’s first investment in Australia, made from the EUR1.1 billion ($1.48 billion) EQT Mid-Market Fund. The buyout resulted in I-Med’s debt being slashed to just under A$300 million.

Diagnostic imaging services – over 90% of which are provided by private clinics – is a stable and growing business in Australia, driven by an aging population, higher incidence of chronic disease, and greater focus on early detection and preventative treatments. Private providers generated total revenue of about A$3.6 billion in 2015, according to Australia’s Department of Health, with the five largest players accounting for more than 40% of the market. I-Med’s share was about 16%.

Speaking to AVCJ in January 2017, EQT explained it had initiated a strategic growth plan that covered three areas. First, improvements to I-Med’s existing platform through organic growth, with a pledge to invest more than A$30 million a year to upgrade equipment and IT systems in each clinic, as well as to roll out new facilities. Second, the pursuit of small-scale add-on acquisitions. And third, operational improvements intended to make the business more united and efficient.

The number of directly-owned clinics and radiologists have grown 30% and 25%, respectively during EQT’s holding period, according to a statement. There have also been efforts to grow market share by winning more referral contracts from hospital chains. As of last January, I-Med provided services to more than 75 public and private hospitals, up 10% since EQT’s investment. These contracts accounted for half of overall revenue, with the rest coming from stand-alone clinics.

Permira has approximately EUR32 billion ($38 billion) in committed capital. With offices in Tokyo, Hong Kong, Seoul, and Shanghai, it has been active in Asia for more than a decade, deploying more than $3 billion. Investments have thus far come from the firm’s global funds, but it is in the process of raising a debut Asia vehicle. The target is said to be $1.5 billion.

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• Topics
• Australasia
• Buyouts
• Trade sale
• Healthcare
• Australia
• Permira Advisers
• EQT Partners