Blackstone and TPG are partying like it’s 2019

TPG

22/10/2025 13:00

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Pranav Kiran

TORONTO, Oct 21  (Reuters Breakingviews) - Buyouts are back. Following the $55 billion take-private of Electronic Arts, a consortium led by Blackstone BX.N and TPG TPG.O is paying up to $18.3 billion for diagnostics company Hologic HOLX.O. As private equity emerges from a long M&A slump just in time to catch falling valuations, it’s returning to its classic tools.

Blackstone and TPG’s offer represents a chunky premium of up to 46% compared to Hologic’s share price before news of a potential deal emerged. Shareholders will receive $76 a share in cash up front, and two payments of as much as $3 a share based on whether a key business unit hits certain revenue goals.

The buyout duo is swooping in just as public-market investors have soured on healthcare. Hologic shares had lost a third of their value in the three years before deal talk bubbled up. The broader industry has badly lagged the S&P 500 Index .SPX.

This kind of situation is a classic set-up for private equity, which tries to strike well-priced deals and lard on debt to juice returns. That’s been tough after first the Covid-19 pandemic and then rising interest rates made bank-led financing scarcer. The Hologic merger agreement may mark the end of this era. The consortium is eyeing $11.5 billion in term loans, equal to a massive 8.6 times the company’s estimated $1.3 billion of EBITDA for the financial year ended in September, based on Visible Alpha data.

Yet the buyers have lined up banks to underwrite a loan package and sell it on to investors, a process known as syndication. The merger agreement specifically includes a waiting period to market the debt; if it falls through, Blackstone and TPG are only on the hook to replace it with credit available on the same terms. Hologic, though, extracted its own safeguard: a giant $900 million break fee if the deal collapses.

After years in which sponsors sometimes offered to backstop entire deals with equity, this is a return to pre-pandemic norms at massive size. Blackstone and TPG may well be underwriting a different EBITDA figure, juiced by cost-cuts or by combining Hologic with other investments. Still, using publicly available numbers, they could extract a 20% annualized return – the sweet spot for a juicy buyout – if they can exit in five years’ time, Breakingviews calculates.

That’s assuming, though, that the duo can sell for 17 times EBITDA, the average for large diagnostics firms computed by KPMG but well above where Hologic has been trading. Rising multiples were, after all, key to private equity’s classic formula. If this deal is any guide, the old times might be back.

CONTEXT NEWS

Medical diagnostics company Hologic said on October 21 that it had agreed to be acquired by buyout firms Blackstone and TPG, in a deal valued at up to $18.3 billion including debt.

Under the agreement, Blackstone and TPG will pay $76 per share of Hologic. In addition, shareholders will receive a non-tradeable right to receive up to a further $3 per share, contingent on certain revenue goals.

The deal includes minority investments from a unit of the Abu Dhabi Investment Authority and an affiliate of GIC.

Goldman Sachs is serving as exclusive financial advisor to Hologic, while Citi is advising the consortium led by Blackstone and TPG.

Healthcare stocks have lagged the market https://www.reuters.com/graphics/BRV-BRV/znpnnykxzpl/chart.png

(Editing by Jonathan Guilford; Production by Maya Nandhini)

((For previous columns by the author, Reuters customers can click on KIRAN/pranavkiran.t@thomsonreuters.com))