The  bid  for Infratil  from  Australian  Super was a fizzer – and now we can see why that’s been great for shareholders and NZ

One  of  the  busiest  companies  on  the  NZX,  investment company Infratil,  has  underlined that  not  all  of the  sharpest  operators in NZ business have  deserted Wellington   for  the brighter  lights  of  Auckland.

This  week  the  company  announced it has executed a conditional agreement to acquire between 50.1% and 60% of Pacific Radiology Group, a comprehensive diagnostic imaging business,  from its existing doctor shareholders for a total consideration of up to $350m.

Pacific Radiology is the largest private diagnostic imaging service provider in NZ, operating 46 clinics in the South Island and lower North Island and employing 90 radiologists.

The acquisition enterprise value of $867m implies an EV/EBITDA multiple of 12.6-13.3x.

Infratil chief executive Jason Boyes says the Pacific Radiology acquisition, if completed, will sit well with Infratil’s other high-performing, high-quality assets, and builds on its investment last year in Qscan Group, a leading diagnostic imaging business in Australia.

“When we outlined the company’s strategic direction in February, healthcare was identified as a sector of considerable opportunity.

“Diagnostic imaging is an essential-services industry, offering a combination of defensive characteristics and structural long-term growth. Pacific Radiology is New Zealand’s largest private provider of diagnostic imaging and has a proven track record for delivering long-term growth, both organically and via acquisition.

“We also see this as an opportunity to scale Infratil’s investment in Qscan Group and create a meaningful Australasian healthcare platform with potential synergies and adjacent opportunities.

“The purchase also confirms our continuing confidence in the NZ market and the thematics which are driving our capital allocation in communications and digital infrastructure, decarbonisation, and aging populations”.

Only in November  last  year  Infratil’s  board  rejected  a  bid for the company from Australian Super  at $7.43 a  share.

Some  shareholders  who were  dismayed  the offer  had  been rejected  (the  shares  at the  low  point  in 2020  had  been  down about $4.40) may  now be pleased  at  the  turn  of  events  since  for  Infratil.

Not  only  has  there  been  the  deal  for  Pacific  Radiology,   but   the  windpower  company  Tilt  Renewables, 66%  owned   by Infratil,   is  being  sold,  with  its  Australian  assets  going  into Australian ownership,  and the  NZ assets   being  taken over  by  Mercury.  Tilt  had been  developed     by  TrustPower, 51%  owned  by  Infratil,  and  its   shares  which had  been around  $3.40 in  mid-2020  have risen to  $7.98. So  around $2bn  is flowing  into  Infratil’s  coffers from  the  sale.

It’s  not  the  only  positive development in  recent  times  for Infratil.  Earlier  this  year  it  reported that an independent valuation of  the  Australian  company CDC Data Centres  at December  31, 2020, indicates a significant increase in the value of its investment in CDC since  September 30 2020.

“Infratil’s 48.1% investment in CDC is now valued at between A$2,039m to A$2,334m, up from A$1,597m to A$1,807m in  September 30 2020”.

This increase in the valuation reflects the acceleration in demand that CDC is experiencing from new and existing customers across its portfolio, which is expected to result in its existing data centres reaching capacity earlier than expected, with a consequential effect on forecast growth.

Infratil has large shareholdings in a range of assets including Vodafone (49.9 %), Wellington Airport (66%) and Trustpower (51%) as well as assets in Australia.

So  not  only shareholders,  but  New  Zealanders   everywhere, should  be  cheering  Infratil’s brilliant  managers  as  they  go  about   their  business.   And  any   regret    that  the  bid  for Infratil  from  Australian  Super failed last year  should have long  gone. What  a  loss  it  would have been.

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