Begin forwarded message:
Lawrence,Some background on our next outbound investment with BHR. We are fundraising for a deal fund pertaining to the acquisition of an Australian chain of hospital, bullet point summary below for your reference as well as the teaser attached. We were just informed today that we have won the bid and it is expected that the SPA will be signed by December 18 and closing will occur before Feb. 2016. We will need to secure LP subscriptions by the end of January with capital calls soon thereafter. Let me know if you any thoughts on interested investors or just take read on background.
BHR (as financial investor) is partnering with China’s leading private healthcare company, Luye Investment (“Luye”, affiliate of the HK-listed Luye Pharma, both being owned by the same ultimate beneficial owners), to jointly acquire Healthe Care (“Aurora”), an Australian hospital operator, for a consideration of approximately AUD938 million, of which up to 40% will be financed through an acquisition loan, with the equity portion to be borne equally by BHR and Luye. BHR has the exclusive right to invest up to 50% of the equity portion in exchange for 45% of Aurora, the share premium is part of the consideration for (i) BHR’s exclusivity and (ii) BHR’s subscription at no additional cost into an onshore Luye vehicle which will serve as the future listing vehicle of Aurora on the A-share market. BHR is raising a special deal fund of AUD480 million for the exclusive purpose of this acquisition.
Target - Aurora is currently the third largest private hospital operator in Australia, scale portfolio of 17 hospitals in some of Australia’s largest cities, providing the highest level of clinical care across a range of acute (cardio-vascular, orthopedics), mental health and specialty healthcare services (ob-gyn, oncology)
Growth - Aurora’s revenue for the 2016 financial year (from July 1, 2015 to June 30, 2016) will achieve approximately AUD560 million, with EBITDA estimated to be circa AUD70 million. Strong revenue growth and operating leverage expected for the next five years with brownfield expansions driving earnings growth, 2016-2020 five-year forecasted CAGR of 11% (revenue), 14% (EBITDA) and 20% (profit)
Growth Drivers - Australia’s aging population and increasing patient demand, together with public system constraints and favorable regulatory environment encouraging the development of high-quality private hospitals, will continue to drive growth. Between 2009 and 2014, private hospital market revenue has increased at a CAGR in excess of 8%
Synergy - Aurora offers a platform to capitalize on Asian private hospital opportunities – scalable operations (hospital design, development, operations and comprehensive management system) can be transferred creating synergy in the Asian private hospital market, Asian patients can also be transferred to Australia for non-acute clinical care
Valuation - valuation for the acquisition expected to be around 15X EV/EBITDA (@AUD 938 million EV, cash free, debt free basis)
Exit – closing of acquisition expected in Q1 of 2016, IPO (A-share) in H2 of 2019 and exit before end of 2020
Trading Comps – A-share listed Aier Eye Hospital’s IPO P/E multiple reached 60.9X, currently trading at 80.3X P/E. If Aurora IPO P/E multiple reaches 45X, IRR will exceed 30%
Put Option – BHR’s Strategic Partner undertakes to repurchase BHR’s investment at 12% IRR in the event of non-listing by specified time (or non-qualified listing).
Timeline – SPA to be signed by December 18, 2015 with closing expected to occur by end of Feb. 2016.
BHR Aurora Fund – 1.5% management fee / annum, 8% hurdle with catch up; 20% carried interest.