Brookfield to Buy Healthscope for $4B; Medical Properties Trust Enters $859M Buy-Leaseback

TORONTO—Brookfield Business Partners, L.P. reports it has reached an agreement to acquire private Australian hospital operator Healthscope in a transaction valued at approximately $4.1 billion (AUD$5.7 billion).

Healthscope, the second largest hospital operator in Australia, is also the largest pathology services provider in New Zealand.

Also, in connection with the merger deal, Birmingham, AL-based Medical Properties Trust, Inc. reports it has entered into definitive agreements to acquire 11 Australian hospitals from affiliates of Healthscope Ltd. for approximately $859 million, and lease the acquired real estate back to Healthscope. The MPT deal is conditioned on the closing of the Brookfield purchase of Healthscope.

Healthscope operates 43 private hospitals across every state in Australia and owns 24 pathology laboratories across New Zealand.

“Healthscope is a leading business offering best-in-class, essential services to the well-established and growing private healthcare sector in Australia and pathology services sector in New Zealand,” says Len Chersky, managing partner, Brookfield Business Partners. “As a long-term operator of and investor in service businesses globally, and one of the largest builders of hospitals in Australia, we are confident in the prospects for Healthscope to strengthen, grow, and continue to provide quality healthcare services to the community under our ownership.”

Brookfield will fund the Healthscope deal with up to $1 billion of equity, $1.4 billion of long-term financing and $1.7 billion from the sale and long-term leaseback of 22 wholly-owned freehold hospital properties. The transaction is expected to close in the second quarter of this year.

Brookfield Business Partners expects to fund approximately one third of the equity, with the balance being funded by institutional partners. Prior to or following closing, a portion of Brookfield Business Partners’ commitment may be syndicated to other institutional investors, the company reports.

Brookfield Business Partners is the flagship listed business services and industrials company of Brookfield Asset Management Inc. a global alternative asset management firm with more than $330 billion of assets under management

Bank of America Merrill Lynch is acting as sole financial advisor to Brookfield. King & Wood Mallesons is acting as lead legal counsel to Brookfield. In addition, Minter Ellison Rudd Watts is providing New Zealand legal advice.

In connection with Medical Properties Trust’s purchase-leaseback deal with Healthscope, the 11 hospitals are concentrated in large metropolitan areas in Australia, and will be leased pursuant to master leases that have an average initial term of 20 years with annual fixed escalations and multiple extension options. The master lease agreements also include provisions for MPT to invest up to an additional $350 million for expansion and redevelopment projects in 2019 and future years, MPT states.

“We are very excited to enter 2019 with the opportunity to establish a new long-term relationship with Brookfield and Healthscope, Australia’s second largest private hospital operator,” says Edward K. Aldag, Jr., MPT’s chairman, president and CEO. “Not only will long-term inflation-protected rents from these highly sought assets be strongly accretive to FFO per share, the transaction will further improve MPT’s tenant and geographic diversification measures.”

Medical Properties Trust expects to fund the transactions with a combination of existing cash balances, including approximately $200 million in net proceeds from recent issuance of common shares, and an undrawn $1.3-billion revolver under the company’s credit facility. The transactions are expected to close in the second quarter of 2019, subject to Healthscope shareholder approval, certain governmental consents and other customary closing conditions.