Deal in Focus: Trilantic's investment in Maugeri highlights structural healthcare reform

At the end of February, Trilantic invested €66m in hospital operator Fondazione Salvatore Maugeri, with plans to increase its investment in the business to €100m by 2017. The deal came after structural changes to the Italian healthcare sector; with cuts to public spending, the Italian government decided to stop all funding to hospital facilities with less than 60 beds by 2017.

Founded in 1965, Pavia-based Maugeri is an Italian research hospital group offering diagnostic and therapeutic services with a focus on non-acute rehabilitation and chronic disease. The company operates in 19 hospitals in Italy with 3,600 employees. In 2014, the business generated €300m in revenues.

Healthy investment
Vittorio Pignatti Morano, Trilantic's chairperson, says the Italian non-acute private care sector is highly fragmented, with high barriers to entry and high demand, driven by the country's ageing population and the increasing market share of non-acute hospitals.

According to Trilantic, the current situation offers an opportunity for consolidation. To date, the only other private equity firms operating in the sector are Ardian, with its homecare provider KOS; and Intesa Sanpaolo's investment arm, Banca IMI, which invested in healthcare operator Service Med in October 2015. Beyond these private equity houses, large industrial groups, including San Donato and San Raffaele, are also targeting the sector.

Trilantic believes sector expertise is necessary when investing in the private care sector. The firm has already invested in hospital operator Mediclinic in 2008 and, more recently, in pharmaceuticals producer Doppel Farmaceutici in July 2015.

The GP wants to turn Maugeri into the largest player in the vertical. The company is already one of the largest players in the physical rehabilitation segment with 15% of market share.

Speaking to unquote", a source familiar with the situation says Trilantic and Maugeri's investment will be used to acquire three to five public facilities from public authorities or religious organisations, which have been earmarked for sale following the government's restructuring plans. At the same time, Maugeri will look to develop in the private sector, where the company currently generates only 2-3% of its revenues.

As part of the deal, Maugeri will transfer its operations into a newco, Istituti Clinici Scientifici Maugeri. Trilantic's vehicle, Fund V Europe, will take a 34% stake in the holding, with the option to increase its stake to 43% by 2017, and Maugeri will take the remaining 66%.

The GP expects to exit the business via IPO by 2020. A secondary buyout is also possible, but a public offering is the preferred option, in which Fondazione Maugeri will still retain a majority stake following the flotation.

According to the deal's terms and conditions, Trilantic can consider only an IPO or secondary buyout to exit the investment. The business cannot be sold to competitors, the source says.

People
Trilantic Europe – Vittorio Pignatti Morano (chair); Giacinto D'Onofrio (managing partner); Marco Conte (principal).
Fondazione Maugeri – Gualtiero Brugger (chair), Paolo Migliavacca (vice-chair).

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• Topics
• Healthcare
• Investments
• Southern Europe
• Deal in focus
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• Trilantic Capital Partners (previously LBMB)
• Ardian (formerly Axa PE)