Healthcare Sector Comment – February 2015

Dato

As the pressure on health and social care budgets continues, the demand for care in the home – as opposed to in a residential setting – continues to increase. As a result of this, we have observed an upsurge in the number of M&A deals in the domiciliary care space over recent years and already this year the space is proving popular.

One standout transaction saw Europe’s second largest residential care group, Orpea SA, branch out into homecare with the acquisition of ADHAP Performances SAS, the France-based provider of homecare services to elderly and disabled people, from AXA SA. France-based listed company Orpea operates 579 facilities – comprised of over 56,000 beds – across Austria, Belgium, the Czech Republic, France, Germany, Italy, Spain and Switzerland.

This fast-growing market has also proved to be a popular target amongst private equity firms. A string of global acquisitions over the last few years has included: the acquisition of City & County Healthcare Group by UK-based Graphite Capital; the acquisition of GHD Gesundheits GmbH Deutschland by Sweden-based Nordic Capital; and the acquisition of Kodinavux Oy and the home services business of Doctagon Ab (now Stella Homecare) by Finland-based Intera Equity Partners Oy.

We predict that the fragmented market will continue to see increased M&A activity over the next 12 months, with the demand for healthcare services not subsiding. There is pressure on smaller players to stay profitable – however, there are several factors affecting their cost base: improving quality standards; the increase in regulation costs and overall wages; and funding pressures. These factors can only be absorbed by large operators who have the scale to do so and who will look to consolidate the market in order to increase their market share.

We will also likely see continued interest from private equity with greater investor confidence creeping back into the market, driven by an improving debt market.

This is a space that Clearwater International knows well having recently advised Sovereign Capital on its investment in Nurse Plus, a specialist provider of staffing solutions and homecare services to the health and social care market.

 

Health & Social Care Deals

In a deal advised by Clearwater International: UK private equity firm Sovereign Capital backed the secondary MBO of Nurse Plus from Key Capital Partners, for an undisclosed amount. Nurse Plus provides healthcare staffing services from 35 branches across the UK and also has a domiciliary care division that provides care for the elderly, younger adults with learning disabilities and complex care packages for those requiring full-time care.

Team Olivia AB, a Sweden-based healthcare portfolio company of Swedish venture capital firm Procuritas, acquired Vesterled AS for an undisclosed amount. Vesterled is a Norway-based rehabilitation-focused residential care homes services provider for those aged 6 – 22.

UK-based Care Your Way – a care company which provides care services for the elderly, those with dementia and younger adults, as well as domiciliary care – acquired Local Care Group for an undisclosed amount. Local Care Group, also based in the UK, provides domiciliary care services.

French-listed Korian Medica SA, an operator of healthcare facilities and medical establishments, acquired Evergreen Holding GmbH, the Germany-based operator of nursing homes, for an undisclosed amount.

Air Liquide SA, a France-based supplier of industrial gases, acquired a 65% stake in Optimal Medical Therapies (OMT) for an undisclosed amount. OMT is a major player in providing home healthcare services for patients in Germany who suffer from chronic illness and require infusion therapy.

The Sims Clinic Ltd, the Ireland-based subsidiary of Virtus Health Ltd, acquired Human Assisted Reproduction Ireland Ltd, an Ireland-based IVF and fertility clinic operator, for a consideration of €6m. The Sims Clinic provides a range of fertility treatment services.

Kindred Healthcare Inc. acquired US-based rehabilitation hospital operator Centerre Healthcare Corporation for a consideration of €156m. Kindred is a healthcare services company that operates hospitals, nursing centres and contract rehabilitation services across the US.

 

Pharma & Biotech Deals

Irish-headquartered Endo International plc acquired Auxilium Pharmaceuticals Inc., a US-based speciality biopharmaceutical company that develops and markets products for urology and sexual health, for a consideration of €1.8bn. Endo is a global speciality healthcare company which – through its subsidiaries – manufactures, markets and distributes branded and generic pharmaceuticals, over the counter medications and medical device products.

Incanthera Ltd, a UK-based drug development company engaged in developing technologies that target tumours, acquired UK company Spear Therapeutics Ltd, a manufacturer of drugs for the treatment of cancer, for an undisclosed amount.

French pharmaceutical contract development and manufacturing firm Amatsi SAS acquired Belgian company SEPS Pharma NV for an undisclosed amount. SEPS Pharma provides drug product development services encompassing pre-formulation and formulation development, analytical drug product development, process development and clinical trial manufacturing.

NYSE-listed pharmaceutical conglomerate Merck & Co. acquired Cubist Pharmaceuticals Inc. for a consideration of €6.8bn. Cubist is a US-based biopharmaceutical company with activities spanning from research and development to commercialisation of pharmaceutical products.

Lexon (UK) Ltd, a UK pharmaceutical distributor serving independent pharmacies as well as major groups, acquired Norchem Ltd, a UK-based pharmaceutical products distributor, for a consideration of €30m.

Medley Pharmaceuticals Ltd, an India-based pharmaceutical company, acquired ZANZA Laboratories (Holdings) Ltd’s generic division for an undisclosed amount. ZANZA Laboratories -based in the UK – markets, distributes and maintains licenses for generic healthcare products.

India-based pharmaceutical company Piramal Enterprises Ltd acquired Coldstream Laboratories Inc., a US-based pharmaceutical development services provider, for a consideration of €21.7m. Piramal primarily manufactures and sells own and traded bulk drugs and formulations.

Otsuka Pharmaceutical Co. Ltd, a Japan-headquartered pharmaceutical company with a focus on nutraceuticals, acquired Avanir Pharmaceuticals Inc. for a consideration of €2.6bn. Avanir Pharmaceuticals is a US biopharmaceutical company focused on novel therapeutic products for the treatment of central nervous system disorders.

 

Medical Equipment & Supplies Deals

Medtronic Inc., a US medical device company headquartered in Ireland, acquired medical device rival Covidien plc for a consideration of €34.7bn. Covidien, based in Ireland, provides a range of surgical, respiratory and monitoring and vascular therapies solutions.

Drive Medical Ltd, a UK-based manufacturer of durable medical equipment in the home healthcare, medical/surgical and rehabilitation sectors, acquired Specialised Orthotic Services Ltd (SOS) for an undisclosed amount. Based in the UK, SOS specialises in the manufacture and supply of postural support systems and associated mobility equipment.

Mediq Danmark, a subsidiary of Netherlands-based medical devices supplier Mediq BV, acquired part of the C. Maersk Andersen company that specialises in supplying medical devices to GPs. Based in Denmark, C. Maersk Andersen offers a broad range of medical devices primarily to GPs but also to specialists, hospitals and municipalities.

Henry Schein UK Holdings Ltd, a subsidiary of Henry Schein Inc., acquired certain assets of Plandent Ltd (dba Claudius ASM and J & S Davis), a UK-based manufacturer of dental equipment and supplies, for an undisclosed amount. Henry Schein is a US-based distributor of medical, dental and veterinary supplies.

Prism Medical Ltd, a Toronto Stock Exchange-listed provider of durable medical equipment, acquired Angel Accessibility Solutions Ltd, a Canada-based manufacturer of safe patient handling products, for a consideration of €2.6m.

OMERIN SAS, the France-based manufacturer of electrical and industrial wires and cables, acquired Union Plastic SA for an undisclosed amount. Based in France, Union Plastic designs and manufactures plastic products for the pharmaceutical, veterinary and medical industries including oral syringes, dosing spoons and packaging devices.

OneMed Group Oy, the Sweden-based medical supplies distributor and portfolio company of 3i Group, acquired Bosman Medical Devices, the Netherlands-based provider of medical devices for diabetes, wound, ostomy and continence care, for an undisclosed amount.

NYSE-listed medical technology company Stryker Corporation acquired the assets of CHG Hospital Beds Inc., a Canada-based manufacturer of low-height hospital beds and related accessories to the acute care markets, for an undisclosed amount.