PE-backed exits tick up

Private equity firms are currently seeking to sell down their stakes in healthcare companies, with a clutch of IPOs due in 2006. In the UK, banks are currently pitching for the IPOs of General Healthcare and Southern Cross, and in France banks have been mandated to advise on options for Medica.

The General Healthcare and Southern Cross IPOs are not expected until the second half of 2006, with both still awaiting the appointment of advisers, but they are expected to be sizeable.

Blackstone acquired Southern Cross Healthcare in September 2004 and has since built it into the largest provider of long-term care service in the UK. The latest acquisition of Ashbourne Care Homes in November 2005 took the company to 573 care homes with 29,000 beds. On the strength of this, the company is expected to be able to achieve a market capitalisation of £1.5bn.

General Healthcare is currently backed by BC Partners, which is now looking to sell down its position. The private equity company sold psychiatric and occupational health division BMI Health Services in 2005. The group still comprises more than 40 hospitals, and BC Partners values its investment at €2.2bn. General Healthcare was briefly listed from 1988 to 1990, when it was known as AMI Healthcare, and was acquired by BC Partners in 2000.

The companies are attractive prospects as they provide stable returns and can achieve significant economies of scale. This is underlined by General Healthcare, which had turnover of £699m in 2004, up just 4.9%, but on this achieved Ebitda of £187m, up 2.3%.

Lazard-IXIS and SG have been mandated for the possible IPO of Medica. Bridgepoint, the selling shareholder, bought the company in 2003 for €330m from the French government.

Government approval also meant the privatisation IPO of UK defence research company QinetiQ could be launched. The company announced its intention to float in a deal that will see both the UK Government and private equity backer Carlyle Group significantly reduce their positions. The deal is to be led by Credit Suisse, JPMorgan Cazenove and Merrill Lynch.

The IPO will see the company raise £150m through the issue of primary stock in a deal that will total £500m–£600m for around half of the company. The secondary stock will come from the government and Carlyle, which have shareholdings of 56% and 30.5% respectively. The two will sell stock on a pro rata basis. The rest of the stock is held by managers and employees.

Pre-marketing continued until a price range was set on January 25. Two weeks of bookbuilding follow until February 9. The company has changed significantly since Carlyle made its investment in 2002 through a competitive tender. QinetiQ has made several acquisitions as it has grown over the past two years. In 2004, it acquired Westar and Foster Miller in North America, and HVR Consulting Services in the UK. The following year it acquired US firms Apogen and Planning Systems, and Belgian space technology firm Verhaert Design and Development.