CVC discards Mehiläinen exit options, focuses on growth

The sponsor has recently been given internal approval to double the size of Mehiläinen again, which will take another two to three years, said one of the sources.

The company is an IPO candidate, one of the sources and a further source familiar said, with one of these adding that discussions on a listing took place in the spring, but the plan has now been benched due to volatile markets.

CVC acquired the company from KKR in 2018 for around EUR 1.8bn via its 2017-vintage fund, CVC Capital Partners VII.

Mehiläinen recorded FY21 EBITDA of EUR 264m, according to its most recent accounts, compared to EUR 108m in 2018. Revenue increased to EUR 1.4bn from EUR 916m in the same period.
The company ranks first on Dealogic's LTI (likely-to-issue) Finnish exits list and third on the algorithm's healthcare exit lists, with an LTI score of 74.88/100.

The company's two closest peers, Finnish Terveystalo and Pihlajalinna, are both listed with the former's share price down 42% and the latter's 29% year-to-date.

Terveystalo saw EBITDA drop 24% in the first nine months due to supply challenges, fewer high-margin long-care pathways, and increased costs, according to its most recent filings.

The comps point to a valuation of about EUR 1.5bn on a blend of EV/sales and EV/EBITDA multiples, based on Dealogic data.
Mehiläinen could also appeal to a strategic buyer like Ramsay Health Care or Fresenius' hospital arm Fresenius Helios, one of the sources suggested.

The longer hold period may also stem from a wider market trend of a valuation expectation gap between vendors and sellers, said the same source. That shift has already caused Montagu to halt the sale of German ophthalmology platform Artemis, as reported by Unquote sister publication Mergermarket.

A number of other European large-cap healthcare deals are also expected to be affected by ongoing challenges in debt underwriting, such as Trilantic's Oberberg and Nordic Capital's European Dental Group.

Sum of parts and break-up
CVC could also look at splitting up the care business from the healthcare services business as these don't belong together, one of the sources said.

It has split out its digital health arm BeeHealthy, which alone is worth about EUR 1bn, another source said, adding that the services provider will need to decide what it wants to sell and how. The digital clinic's valuation may now have decreased in line with tech valuations, added another source.

Mehiläinen has been selling the digital clinic's software to other large inpatient and outpatient groups, including Mediclinic, with a goal to make the BeeHealthy platform "as large on a global level as Mehiläinen is now on the domestic level", as announced.

The elderly care side of the business has not fared as well, said two of the sources, with one adding that it could be in much better shape in a couple of years when price rises have gone through. Around 30% of its revenue is derived from its social care business, according to its accounts.

Growth and international horizons
There are limited growth opportunities left in Finland, said two of the sources, with one pointing out that it will be difficult to sell on that story, especially to public market investors. CVC already tried a tie-up with Pihlajalinna but the deal was blocked by competition authorities.

The company needs to properly become a multi-country platform and prove the synergies to become an interesting sale prospect, said one of the sources.

Mehiläinen recently entered Estonia, by acquiring Qvalitas and Unimed, and Sweden through organic expansion boosted by small bolt-ons. It also acquired a small hospital in Germany that gives it a necessary legal license under TSVG to build a wider outpatient platform, saying in its annual report that it wants to develop a digitalised nationwide chain of smaller clinics through business acquisitions.

CVC and Mehiläinen did not respond to requests for comment.

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• Topics
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