Healthscope Rejects Bupa’s Takeover Hopes

Healthscope's current leadership is firmly resisting takeover interest from Bupa, aiming to preserve its independence and safeguard patient care. The outcome, however, may still depend on agreements with creditors and concessions from landlords. After entering receivership, the hospital operator is working to fend off acquisition efforts from health insurer Bupa, despite carrying $1.6 billion in debt and now being under the control of its lenders. At issue is whether Australia's second-largest private hospital network remains intact or is broken up.

The once-ambitious Healthscope, which runs 37 hospitals across Australia, entered financial distress last week after its private equity owner Brookfield Asset Management handed control to creditors. Brookfield acquired Healthscope in a $5.7 billion deal in 2019, but the investment resulted in a $2 billion loss and disappointing returns. A formal sale process is now underway with the goal of finding a new owner within 10 weeks.

In the meantime, Healthscope's executives are pushing back against any takeover by health insurers. They argue that these companies have historically underfunded hospital care and should not benefit from the resulting financial difficulties. Bupa is one of several potential buyers and has reportedly hired advisers to assess the assets. Healthscope has already received about 10 non-binding offers from both domestic and international hospital groups, including Ramsay Health Care, though none have been publicly disclosed.

A key concern is whether a sale to an insurer such as Bupa might compromise clinical decision-making or lead to the closure of hospitals. Healthscope insists that care standards will not be affected and says every hospital in its network is capable of posting a profit if funding arrangements can be adjusted. To achieve long-term financial stability, the company is urging insurers and landlords to make financial sacrifices.

Healthscope's landlords, including Toronto-based Northwest Healthcare and Australia's HMC Capital, own 23 of the 37 hospital sites. According to Healthscope, these landlords may need to lower rents to current market rates in order to attract a buyer that wants to purchase the entire portfolio. At the same time, the Commonwealth Bank has extended a $100 million funding facility to cover operational costs for the next year while the sale process continues.

Healthscope remains optimistic about its future but acknowledges that nothing is certain. The receivers favor selling the business in one piece, although the complicated web of funding and ownership arrangements presents significant hurdles. The company's first creditor meeting is scheduled for Thursday, which may help define the next phase of its recovery.

Source: Australian Financial Review, Ground News