New Frontier to privatize US-listed China hospital business

The consortium, which includes UFH founder Roberta Lipson and other existing shareholders such as Nan Fung Group and Vivo Capital, is offering to buy the company for $12.00 per share, according to a filing. This represents a 27.9% premium to the February 8 closing price and reflects a valuation of around 86x adjusted EBITDA for 2019.

The company, which trades as New Frontier Health, closed at $10.81 on February 10, up 11.44%. Consortium members already own 39.8% of the shares and the acquisition vehicle holds proxies representing a further 13.2%.

New Frontier Group was founded by Carl Wu, formerly of The Blackstone Group, and Norman Cheung, a serial entrepreneur. Together they established Boxful, a self-storage and logistics services business. They were later joined by Antony Leung, group chairman and CEO of Nan Fung Group, previously Blackstone’s chairman of Greater China financial secretary of Hong Kong.

The company expanded into online-to-offline local services and then healthcare, building a portfolio that encompasses home healthcare services, senior care facilities, rehabilitation clinics, a licensed doctor group, a precision medicine business, oncology centers, and hospitals. The acquisition of UFH turned it into one of China’s largest integrated healthcare services players.

UFH was listed in the US until 2014 when TPG Capital and Fosun Pharma took it private in conjunction with Lipson at a valuation of $461 million. The SPAC, New Frontier Corporation, raised $478 million in 2018 and took it public again.

The $1.3 billion deal included equity commitments of $711 million from the likes of Vivo and Nan Fung, $90 million from the SPAC sponsor, rollover equity from Lipson and other UFH management as well as Fosun, and $300 million in senior debt. This left $180 million on the merged entity’s balance sheet for working capital.

As of year-end 2019, New Frontier Public Holding – the SPAC sponsor, which is controlled by Leung and Wu – held a 12.4% stake in New Frontier Health. Leung and Wu also owned additional shares in a private capacity. Vivo, Fosun, and Nan Fung had interests of 10.9%, 7.3%, and 7.2%, respectively, while Lipson held 2.7%.

New Frontier Health operates nine hospitals – including two under construction – and 18 clinics with more than 700 licensed beds across all four of China’s tier-one cities. An additional facility in Shenzhen that New Frontier Group acquired from China Resources Group and planned to turn into a general hospital was wrapped into the UFH portfolio on a management contract basis.

Revenue came to RMB2.37 billion ($367 million) in 2019, up from RMB2.06 billion a year earlier. Over the same period, the net loss widened from RMB154 million to RMB228.4 million.

Joining the New Frontier family was intended to support UFH’s growth. “We’re at an inflection point where I can see that acceleration in growth becoming a reality. We are extending our hub-and-spoke model in tier-one and tier-1.5 cities where we already have a presence and targeting some new geographies. We are also offering more in-depth services,” Lipson told AVCJ in 2019.

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• Topics
• Greater China
• Healthcare
• Buyouts
• Trade sale
• China
• New Frontier Group
• SPAC