Healthscope and its private equity owners have raised A$2.25 billion ($2.1 billion) in Australia’s largest IPO for more than three years after pricing its shares towards the top of the indicative range.
Australia’s second-largest private hospital operator sold 1.89 billion shares at A$2.10 per unit on Thursday, the upper end of the original A$1.76 to A$2.29 range, according to a term sheet. This values the company at A$3.6 billion, and the shares represent 62% of the enlarged share capital.
The firm’s private equity backers, TPG Capital and Carlyle Group, are understood to have pocketed A$1.4 billion from the share sale, and now own a combined 37.5% of the company.
More than half of the deal was secured by cornerstones before books opened, largely a mix of domestic and global fund houses and pension funds who pledged to purchase A$1.6 billion, a banker close to the deal told FinanceAsia.
TPG and Carlyle Group are said to have approached BlackRock, Canada Pension Plan Investment Board and Singapore wealth fund GIC in April about Healthscope.
The banker described the institutional tranche as “massively oversubscribed”, a result of such a significant portion of shares being locked up early in the bookbuild process. “For the institutional investors participating in the bookbuild over the last few days, many only received 10%,” he said.
It was a similar story for retail investors. Although there was A$1.2 billion worth of demand from this tranche, retail investors were allocated roughly A$800 million, the banker said.
It is Australia’s largest IPO since rail operator Aurizon Holdings raised A$3.99 billion in November 2010, according to Dealogic data.
At A$2.10 a share, Healthscope will trade at 22 times 2015 earnings, a 10% discount to Ramsay Health Care, Australia’s largest private healthcare operator and the company’s closest comparable.
Healthscope was initially marketed between 20 to 23 times forecast 2015 earnings, a 2% to 17% discount to Ramsay, which is currently trading at 28.5 times its 2014 earnings. Ramsay shares are up 23% so far this year up to July 24.
The hospital operator has also been compared to Malaysia’s IHH Healthcare Bhd, Thailand’s Bangkok Chain Hospital, Singapore’s Raffles Medical Group and Phoenix Healthcare in China, all trading between 31 and 50 expected 2014 earnings, according to Bloomberg data.
But prospective investors were told that Ramsay was its closest comp, with bankers and analysts citing similar dynamics, growth stories and the fact that both operate in the same country.
Ramsay boasts the largest portfolio of private hospitals in Australia, and has been expanding in Europe and Southeast Asia, recently announcing plans to acquire 75 facilities in France, including 61 hospitals, from Générale de Santé. The acquisition makes Ramsay the largest operator of private hospitals in France.
Healthscope on the other hand intends to focus on domestic expansion and will use the proceeds from the IPO to build private hospitals and pay back some loans. The company had a net debt of A$865.5 million as of year-end 2013.
Macquarie Capital and UBS were global coordinators on the deal, while Bank of America Merrill Lynch, CIMB, Credit Suisse and Goldman Sachs acted as lead managers.