PEP sells Australia, New Zealand healthcare businesses

Ebos is getting LifeHealthcare for an enterprise value of A$1.28 billion ($915 million), approximately six times what PEP paid for it in 2018. The size of the Evolution Healthcare deal has not been disclosed, but local media put it at A$700-800 million.

LifeHealthcare is described as one of the largest independent distributors of third-party medical devices, consumables, and capital equipment in Australia, New Zealand, and Southeast Asia. It also manufactures materials used in allografts, which involve the transplantation of cells, tissues, or organs from one individual to another who is not an identical twin.

The Southeast Asia footprint covers Singapore, Malaysia, Thailand, Indonesia, Hong Kong, the Philippines, and Vietnam. Singapore and Indonesia are the two largest markets.

LifeHealthcare represents more than 120 original equipment manufacturers (OEMs), including Stryker, Establishment Labs, Johnson & Johnson, Abbott, and MicroVention.

The company was formed in 2006 by Crescent Capital Partners through the aggregation of several smaller medical device manufacturers. It was listed in 2013. PEP completed a A$211 million privatization five years later.

Ebos will take 100% of LifeHealthcare’s Australian and New Zealand subsidiaries and 51% of Transmedic, the company’s Asian subsidiary. The Transmedic founders will retain 49% and continue to run operations on a day-to-day basis, although agreements are in place that could see Ebos assume full ownership in the medium term.

The acquisition will be funded through the issue of A$100 million in shares to retail investors, a fully underwritten share placement of A$642 million, a debt package of A$540 million, and the issue of A$23 million in shares to LifeHealthcare management.

Ebos, which distributes healthcare, medical, and pharmaceutical products, generated A$9.2 billion in revenue for the 12 months ended June 2021 and has a market capitalization of NZ$6 billion ($4.1 billion). It said in a filing that the purchase of LifeHealthcare would create one of the region’s leading medical device distribution companies.

Pro forma revenue for the 2021 financial year came to A$326 million, up from A$298 million in 2020, while EBITDA rose from A$72 million to A$92 million. Ebos expects LifeHealthcare to achieve EBITDA of A$110-114 million in 2022, which means it is paying an earnings multiple of around 11.5x.

The distribution and allograft businesses in Australia and New Zealand account for 71% of revenue, with Asia distribution contributing 29%. In terms of product mix, spinal treatments – specifically, implantable spinal devices – are responsible for 45% of revenue, followed by orthopedics on 11%.

In 2017, the year before PEP’s acquisition, LifeHealthcare generated A$126.7 million in revenue, A$19.7 million in EBITDA, and A$7.1 million in net profit.

The private equity firm bought Evolution Healthcare in 2019. It runs 10 hospitals in New Zealand, plus assorted ancillary healthcare facilities, and one in Australia. More than 300 surgeons perform approximately 57,000 procedures every year.

QIC is making the acquisition through its infrastructure strategy. It continues a trend of financial sponsors using infrastructure funds to buy operating businesses in Australia that have real assets exposure. They can bid up for assets because they are underwriting to lower returns. EQT used its infrastructure strategy to acquire Icon Group, a local radiology clinic chain, earlier this year.

“This investment is wholly aligned with our sector-centric, thematic-based infrastructure investment strategy. It leverages one of our key megatrends, an aging population, and the secular tailwinds of increased chronic illness and growing healthcare needs arising from public health constraints,” said Ross Israel, QIC’s head of global infrastructure, in a statement.

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• Topics
• Australasia
• Healthcare
• Trade sale
• Australia
• Pacific Equity Partners
• Exit
• medical devices
• New Zealand
• QIC
• Sunsuper