Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

UPDATE 2-Australia's Healthscope to spin off hospitals as patient exodus hits profits

Published 21/08/2018, 01:26 pm
Updated 21/08/2018, 01:26 pm
© Reuters.  UPDATE 2-Australia's Healthscope to spin off hospitals as patient exodus hits profits

© Reuters. UPDATE 2-Australia's Healthscope to spin off hospitals as patient exodus hits profits

* To spin out 29 wholly owned hospitals

* Seeks buyer for nearly half of property trust

* Operating profit halves, in line with own expectations (Adds background and analyst comment, response from previous suitors, share move)

By Byron Kaye and Tom Westbrook

SYDNEY, Aug 21 (Reuters) - Australian hospital operator Healthscope HSO.AX , which recently rejected two takeover approaches, plans to inject A$1 billion ($731.6 million) of its property assets into a trust and sell nearly half of that to an investor.

The move will help Healthscope make the best of buoyant commercial real estate prices and free up cash as a costly hospital expansion program, shrinking patient demand and cuts to private health insurance payouts weigh on its profits and shares.

Healthscope, the country's No. 2 private hospital group, also said in a statement on Tuesday that annual operating profit halved, as expected.

The company's stock has dropped 16 percent since it rejected the two $3 billion-plus offers in May and has lost a third of its value since its peak in September 2016. said the new real estate trust would hold its 29 fully owned hospitals. These would be leased back to the parent company, which would own a majority stake in the trust, while it will seek an investor who would hold up to 49 percent.

"This structure increases the operating leverage at a challenging time for the private hospital sector," JP Morgan analysts said in a research note.

Healthscope - which rejected buyout offers from Canada's Brookfield Asset Management BAMa.TO and a consortium of local private equity firm BGH Capital and 14 percent shareholder AustralianSuper - did not elaborate if it was in talks with interested parties.

"It will preserve Healthscope's control and management rights over our hospitals, as well as our operating flexibility to continue to deliver on their growth potential," Chairman Paula Dwyer said in the statement.

The company said it will pass on proceeds from the sale to shareholders. JP Morgan analysts said the company might sell the 49 percent stake for A$800 million.

Brookfield, BGH and AustralianSuper declined to comment.

A spokesman for Canadian landlord NorthWest Healthcare Properties REIT NWH_u.TO , which bought a tenth of Healthscope in May, said the company wants to see the details of Healthscope's proposal before commenting.

In July, Healthscope sold its Asian pathology business comprising 39 laboratories to TPG Capital Management LP TPG.UL for A$279 million. shares were up 0.5 percent on Tuesday afternoon, while the broader market .AXJO was down 0.9 percent. ($1 = 1.3669 Australian dollars)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.