* Virtus Health lists on ASX at 7 pct premium
* Valued at A$485 million in first IVF company float
* Analysts say positive start encouraging for IPO market
By Jane Wardell and Jackie Range
SYDNEY, June 11 Australia's Virtus Health Ltd
became the first in-vitro fertilisation company in the
world to list, hitting the boards at a 7 percent premium to its
offer price and sparking hope of renewed life in the country's
stalled initial public offering market.
The float is the largest on the Australian exchange so far
this year and the biggest private equity exit via an IPO since
the disastrous $2 billion listing of department store company
Myer Holdings Ltd in 2009.
The strong debut augurs well for other new listings in
Australia, showing an appetite for fresh investment
opportunities and a willingness to buy into companies that have
been backed by private equity even though some of these have
performed poorly in the market.
Virtus shares began trading at A$6.01 ($5.68) on Tuesday,
well above the A$5.68 offer price set for the float by
Sydney-based Quadrant Private Equity, giving the company a
market value of around A$485 million. The stock closed at
The shares had already been priced at the top end of an
indicative range in the A$338.7 million float.
"It's a very good start and the volume's there," said
Melbourne-based IG markets strategist Evan Lucas. "It's
certainly going to make the IPO market quite a happy little
place to be."
Virtus is the leading firm in Australia's A$500 million IVF
market where one in every three IVF babies born in the country
are a result of the company's clinical services.
Quadrant bought into the sector with a A$33 million
investment in IVF Australia in 2008 and, while it declined to
disclose how much it paid for subsequent purchases to form
Virtus Health, it is believed to have cashed out on a multiple
of at least 3 times.
Having originally flagged that it might retain 10 percent of
the company, Quadrant opted to offload its whole stake on strong
investor demand, Virtus Chief Executive Sue Channon said.
Such demand is welcome news for the Australian market, which
has experienced a drought of significantly sized IPOs in recent
years following some lacklustre performances.
Private equity firms in particular have had a rocky time
attempting to exit their holdings via stock market listings.
"Unfortunately over the past decade the large private equity
businesses that have come to market haven't had a very high
success rate," said Wilson HTM investment Group investment
adviser Peter Esho.
Drilling services company Boart Longyear Ltd,
underwear group Pacific Brands Ltd, fast food group
Collins Foods Ltd, resources services provider Calibre
Group Ltd have all underperformed.
Myer's 2009 float by TPG Capital and Blum Capital was the
nadir -- the retailer's stock has not traded above its A$4.10
issue price and now changes hands for around A$2.28.
Analysts are hopeful that Virtus' arrival could signal the
start of an upswing.
"The IPO market may actually finally see some better uptake
considering that it's been so downtrodden over the last three
years," said Lucas.
Among potentials to follow Virtus to market are equipment
firm Coates Hire, logistics and steel company Bis Industries,
share registry business Link Group and entertainment group Nine.
U.S. buyout firm KKR & Co. had reportedly considered
an IPO exit from Bis, but did not appoint bankers amid a weak
Nine has held talks with bankers who have approached private
equity owner Apollo about an IPO of around A$1 billion, sources
have told Reuters.
Virtus anticipates growing demand for its services due to
factors including the growing female population, the rising age
of women when they have their first pregnancy and higher social
acceptance of assisted reproductive services.
The company posted a net profit of A$24.7 million in 2012
and is forecasting profit of A$26.6 million this year and A$31.4
million next year.
Channon said the company saw growth opportunities in
immature markets in the Asia-Pacific, China, India and Middle
However, the company has acknowledged that a key risk for
the business is the potential for a reduction in the level of
funding rebates patients can claim from the Australian
government for private IVF services.
About half the company's revenue comes from government
payments, with 15 percent from private insurers and 35 percent
from individuals' out-of-pocket payments.