Australian nursing homes appealing targets for Asian healthcare investors By Louise Weihart in Sydney, Natasha Khan in Hong Kong and Riddhima Saxena in Mumbai
Published: May 5 2011 15:10 | Last updated: May 5 2011 15:10
Australian nursing homes could be among healthcare services companies to attract attention from Asian investors as they increasingly face western-style diseases and aging populations, according to an Australian advisory source and an Asian consultant interviewed by mergermarket.
Australia is Asia?s market leader in aged care and many investment, real estate and healthcare services businesses from the ASEAN region could consider jump-starting growth by acquiring Australian know-how, said Pawel Suwinski, Principal Consultant at Frost & Sullivan?s Global Healthcare Practice. Not only does Australia have attractive legal and economic policies, but it also has favourable demographics in that the huge aging population is health conscious and willing to spend on healthcare, he said.
Corporate finance partner at Deloitte, Tapan Parekh, agreed, noting that operators of private hospital groups and nursing homes could present particularly attractive opportunities, and added there is no shortage of potential healthcare service targets from hospital, dental and audiology to radiology, imaging and pathology, many of which are privately owned and have revenues between AUD 50m (USD 54.2m) and AUD 100m.
While it might be difficult to execute a deal with Australia?s hospital giants Healthscope and Ramsay, there are a number of smaller private hospital group operators that could be good targets, Parekh said, citing Champ-owned Healthe Care, which is reportedly on the market for a possible AUD 300m and operates 12 hospitals, and Pulse Health (ASX: PHG), which operates five hospitals.
Pulse Health CEO Justin Matthews agreed that the company could be an attractive target, and as previously told to this news service, could become increasingly attractive as it continues to meet its growth goals. Macquarie Health, also with five hospitals, and IPHO, with seven, are other private hospital group operators. Matthews previously suggested to this news service that there could be investor value in putting the private hospital group operators together.
Meanwhile, Parekh thought that, although Australia?s residential and aged care sector is dominated by not-for-profit organizations, there are a number of sizeable for-profit operators that could also attract Asian investor attention. He cited organizations like Regis, Japara and ARcare, which are rumoured to have been on the market in the past year.
There will be different investment rationales from the different Asian geographies, the sources agreed. Australia gives access to higher quality assets and good margins, which makes it attractive for South Asian, especially Indian companies, such as Apollo Hospitals, said an Indian healthcare banker. At the end of last year, India?s Fortis Global Healthcare acquired a minority stake, which it later upped, in Australia?s Dental Corporation Holdings (DCH). Parekh also noted that Australia offers a good learning ground for Asian operators to take ideas and methods back to their home countries.
According to Suwinski, the main reason for investment from the ASEAN tigers is their need for inorganic growth to enable them to become pan-Asian healthcare services operators. Potential investors, he said, could be organizations like Malaysia?s KPJ Healthcare, Khazanah (which is also Singapore?s Parkway?s parent company) and Indonesia?s Lippo group, which has the muscle to join the Asian healthcare investor foray.
Suwinski also cited Holista Colltech as an example of a successful Malaysian business venture involving both M&A and a listing into Australia. The sheep collagen biotech company was formed by a merger of Malaysia?s Holista Biotech and Australia?s Colltech in 2009. A Malaysia-based industry analyst added that, in 2010, KPJ Healthcare bought a 51% stake in Australia-based retirement village operator Jeta Gardens Waterford Trusts for USD 6m to help it gain specialization and bring the technology back to Malaysia
Interesting how Pulse CEO Justin Matthews quotes "There could be investor value in putting the private hospital group operators together."
Maybe its not just a Pulse and Macquarie merge could IPHOA be also involved? A group owning 17 private hospitals would easily be Australia's third biggest private hospital operator!
PHG Price at posting:
4.6¢ Sentiment: Buy Disclosure: Held
