Bain bets big on healthcare

Weeks after announcing Japan’s largest buyout in two years, the private equity giant is dropping $487m on medical response technology provider Physio-Control.

Bain Capital has agreed to purchase Physio-Control, a medical emergency response technology provider, from Medtronic in a transaction valued at $487 million, according to a statement. The deal, which is subject to regulatory approval, is expected to close in the first quarter of 2012. 

The Boston-headquartered private equity firm made the transaction through its 10th fund, which raised $10.7 billion in 2007, a source with knowledge of the deal said. Non-equity financing was provided by Citigroup Global Markets and RBC Capital Markets. 

The 10th fund was generating a 1.76 percent internal rate of return as of 31 March, according to California State Teachers’ Retirement System documents. 

Bain did not return a request for comment. 

Physio-Control, which is based in Redmond, Washington, produces medical emergency response products like defibrillators, chest compression systems and cloud based data management tools used in hospitals and the workplace. The company’s president, Brian Webster, will be named chief executive officer following the completion of the transaction. 

Last year, Bain paid around $1 billion for Air Medical Services Group, an air ambulance service provider, according to reports. Other healthcare portfolio companies include medical device manufacturer Accellent, addiction and behavioral treatment provider CRC Health Group and hospital group HCA, which raised $3.79 billion in the largest-ever private equity-backed initial public offering earlier this year. 

HCA has underperformed since the offering. Its share price tumbled following a disappointing 25 July earnings call, plummeting to as low as $17.66 in September. The stock has recovered since then, closing at $25.05 on 17 November.    

Healthcare has been a hot sector for private equity this year, with several firms securing acquisitions and others landing strong exit multiples. In September, two former executives from The Carlyle Group launched NaviMed Capital, which will specialise in late stage venture capital and growth equity investments in the healthcare sector. Earlier that month, Veronis Suhler Stevenson sold healthcare services company Avatar International to The Riverside Company, generating a more than 4x return multiple, VSS said in a statement.

Bain Capital was founded in 1984 and holds around $66 billion in assets under management, according to its website. Last month, the firm announced plans to acquire Japanese restaurant chain Skylark for $2.1 billion, the largest buyout deal in Japan in two years.