Thursday, August 19, 2010

Good Timing for Healthscope to Go Private

Healthscope CEO Bruce Dixon waxed on the advantages of being a private firm. One of those is aggressive growth outside the public eye. The Australian reported:

Mr Dixon said there were obvious constraints for publicly listed companies, such as the requirement to provide continual financial updates, that would not apply under a private equity model.
"It's good timing for the group to go private and be off the front pages for a while, while we try to grow," he said.
"The benefit of private equity is . . . you can fast-track things without upsetting investors."
Mr. Dixon should call Boeing or SemGroup investors for a reference on private equity's track record off the financial pages. The Carlyle Group's Vought Aircraft Industries upset Boeing by gunking up 787 Dreamliner production. SemGroup went belly up from bad energy bets, which weren't listed in their SEC filings.
Healthscope had a good year as a public company.
Healthscope has reported a full-year profit of $99 million, up 37 per cent, on the back of continuing strong demand for private hospital services. Group revenue rose 11.5 per cent to $1.84bn.

It won't take long for private equity to eat up Healthscope's profits through dramatically higher interest expenses, annual management fees and special dividends? Carlyle and TPG will finance the deal with $1.5 billion in equity and $1.2 billion in debt.
As buyers intend to retain management, Dixon must sell the deal. The irony is twofold. One, Dixon's big payday will come when Healthscope goes public again. And two, Carlyle co-founder David Rubenstein believes all major private equity underwriters (PEU's) will go public in 2-3 years. Is this more Carlyle puffery?

Update 4-22-14:  Carlyle plans to flip Healthscope one of three ways.  It looks like a double for Carlyle.