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[Exclusive]NPS invests $300 mn in TeamHealth as co-investor with Blackstone

Feb 06, 2017 (Gmt+09:00)

South Korea’s National Pension Service (NPS) has agreed to buy a 10% stake in TeamHealth Holdings Inc. for about $300 million, in a joint investment in the US hospital staffing company with Blackstone Group, the private equity firm said on Feb. 6.

Blackstone had signed an agreement to acquire TeamHealth in a $6.1 billion deal late last year. The transaction was approved in a TeamHealth shareholders meeting in January and is expected to close by end-March, according to a statement from TeamHealth.

The equity purchase is the first joint investment of the NPS in a large-size overseas buyout deal, in which two major Canadian pension funds - Caisse de Dépôt et Placement du Québec (CDPQ) and PSP Investment - are understood to participate as co-investors for undisclosed sums.

“As the US healthcare market is likely to continue to grow with an aging population and the medical service industry is accelerating its consolidation, we expect to make internal rate of return of over 10% a year from the investment,” said an NPS source. “In order to secure large-size investment opportunities, we will further expand co-investment from this year.”

Blackstone had signed a sales and purchase agreement with the NPS, under which the $450 billion pension fund will take a 10% stake in TeamHealth, out of the 100% which Blackstone had agreed to acquire. The equity purchase price is $43.50 per share, the same as the acquisition price for Blackstone.

Private equity firms tend to propose joint investments to big institutional investors such as the NPS, separate from receiving capital commitment to a fund. Through co-investment, investors can save fees paid to the fund and make capital gains from a buyout deal in the proportion of their equity stake in the invested company. For an asset management company, they can share the capital contribution for a sizeable buyout transaction and spread investment risks to limited partners by making a joint investment.

Stephen Schwarzman Blackstone CEO at NPS conference

Last year NPS, together with CalPERS and China Investment Corporation (CIC), had participated in the A$9.7 billion acquisition of the Port of Melbourne via a joint fund managed by New York-based Global Infrastructure Partners (GIP).

NPS had also joined in the financing of the $6 billion purchase by private equity firm MBK Partners of Tesco's South Korean business in 2015, along with Canada Pension Plan (CPP): the world’s third-largest pension scheme invested in mezzanine debt for the transaction.

Separately, Korea Investment Corporation, South Korea’s sovereign wealth fund, had invested $100 million in BC Partners’ $8.7 billion acquisition of PetSmart Inc., the biggest US pet supplies and service retailer, in 2015.

TeamHealth, established in 1979, offers hospital outsourcing services, including emergency medicine, anesthesiology and ambulatory care. With more than 20,000 physicians and clinicians, it provides staffing and administrative services to approximately 3,300 hospitals and physician groups across the US. It posted operating profits of $150 million on sales of $3.6 billion in 2015. The company’s sales had soared by an average 20% in the recent five years since 2011.

Blackstone had acquired TeamHealth in 2005 and exited the investment through an IPO in 2009.

By Chang Jae Yoo

Yeonhee Kim edited this article

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