Swedish alternatives investment firm, EQT Group, has agreed to acquire Brisbane-headquartered cancer care provider, Icon Group, as it continues its foray into the healthcare sector.
The investment will be made through its recently closed €15.7 billion ($17.7 billion) EQT Infrastructure V fund, and it is in line with the firm’s thematic investment approach, partner and head of EQT Infrastructure Asia Pacific's advisory team, Ken Wong, told FinanceAsia in this Asia exclusive.
“Healthcare is a sector in which we have decades of experience. We’ve conducted over 40 healthcare deals since we were founded, including 20 in the past five years alone,” he added.
The pandemic is not behind this acceleration, nor has it had a material impact on the resilience of the businesses that EQT is eyeing, Wong said. “We’re looking at companies which provide services that need to be delivered, regardless of the pandemic.”
Icon Group specifically offers integrated radiology and oncology services across a network of centres in Australia, New Zealand, Singapore, Hong Kong and China.
It is currently owned by a consortium comprising state investor, Queensland Investment Corporation (QIC), private equity firm Pagoda Capital, and Goldman Sachs Asset Management. Goldman Sachs will remain a minority shareholder following the acquisition, the announcement said.
Details of the transaction were not disclosed, but according to media reports, EQT is believed to have acquired a majority stake for approximately A$2.4 billion ($1.7 billion), including debt.
Explaining the rationale behind the investment, Wong said, “the fact that Icon was the leader in each of its respective business units made it very attractive. Additionally, EQT is a growth-minded investor and we saw a lot of growth opportunity, through leveraging our global network and global expertise.”
The latest acquisition will result in EQT Infrastructure V fund being 60-65% deployed, Wong confirmed, declining to comment on when he expects the fund to be fully invested.
Besides healthcare, the fund’s investment pipeline includes opportunities in energy, transport and logistics and telecommunications. EQT is currently the largest private investor in fiber optic infrastructure globally, Wong added.
An electric future
The firm has been very active recently in the transport and logistics sectors, acquiring two ferry companies in the Nordics: Molslinjen, which EQT completed in March 2021 and Torghatten, which also closed this year.
In April, the team bought US school bus businesses, First Student and First Transit. “Through these investments we are helping to electrify the fleets,” Wong said, discussing how the company applies ESG to its operations.
The fund does not have a specific target internal rate of return (IRR) but instead takes a risk-adjusted approach depending on the investment, which it discloses to investors, Wong said.
Former head of EQT’s Mid Market Asia advisory team, Martin Mok, previously told FA that the firm’s Mid Market Asia III private equity strategy, aimed to achieve a return on capital in the range of 3-3.5X.
Australasian opportunity
The Icon Group acquisition marks the firm’s first infrastructure deal in Australia and its third Australia deal overall, Wong shared. Wong, an Aussie native, joined the firm in October 2018, before going on to lead the company’s business in the region. He brings to the role experience from Macquarie Capital and Affinity Equity Partners.
The first deal in the market comprised EQT’s acquisition of radiology provider I-Med, which the company went on to exit in 2018, and the second, IT services business Nexon, which they acquired in 2019.
Icon also forms the company’s third infrastructure investment in Asia Pacific, following the launch of its renewable energy platform in India, O2Power, alongside Singapore state investor Temasek, and its acquisition of New Zealand-based retirement village operator Metlifecare, both in 2020.
The O2Power, Metlifecare and Icon deals were carried out under the firm’s infrastructure strategy, while the investment in Nexon was conducted through EQT’s third Mid Market Asia fund, Wong explained.
Since opening an Australia office in February 2020, the team has grown to 18, he said, including one fundraising executive.
Last month FA reported on EQT’s first two local hires in Japan, following the opening of its most recent Asia Pacific office in Tokyo in January 2021.
Strategic scale
EQT is looking at further opportunities in Australia through its infrastructure funds as well as its €15.6 billion private equity fund, EQT IX. “We really like the Australian market and believe we are competitive with our differentiated proposition that lies in our governance model, our growth focus, our global connectivity,” said Wong.
On the firm’s exit strategy for Icon, Wong said, “we foresee a range of potential owners after we’ve implemented our full potential plan. It's a highly strategic asset as one of the few plays of scale in this in this field globally, so we think there could be strategic interests.”
Wong also envisages the possibility of selling Icon to other infrastructure investors and does not rule out an initial public offering (IPO).
“We haven't decided which exit route we will take.”
