Monday, May 31, 2010

4 Out of 5 PEU's Want their Mitts on HealthScope

KKR will join the bidding for Australian hospital company HealthScope. The Carlyle Group, TPG and Blackstone are already at the table. Four of the five world's largest private equity underwriters (PEU's) are vying for HealthScope.

A third bidder may be a U.S.-based private hospital operator being advised by Citigroup Inc. HCA, Community Health Systems (CHS) and Tenet Healthcare are sizable players. However KKR's HCA is in line for an independent public offering. Tenet is a serial ethics abuser and owner of Memorial Medical Center, where 35 patients died after Hurricane Katrina.

Deals involving HCA and CHS added over $2 billion in interest costs to America's health care system. How much interest expense would a PEU buyout of HealthScope add to Australia's health burden?

PEU's want to sell the pathology business and put hospital facilities into a real estate fund. It's not clear if the private hospital company would follow the same strategy. PEU interest in hospitals isn't solely a Down Under phenomena. A flurry of American deals are underway.