The many extracts on these pages are from copyright material. They are owned by the reference given or its owner. They are reproduced here for educational purposes and to stimulate public debate about the provision of health and aged care. I consider this to be "fair use" in the common interest. They should not be reproduced for commercial purposes. The material is selective and I have not included denials and explanations. I am not claiming that all of the allegations are true. The intention is to show the general thrust of corporate practices as well as the nature and extent of any allegations made.

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Citigroup overview

Early Citigroup
Citicorp/Citibank ...
Salomon Smith Barney
Citigroup merged

Citigroup 21st Century
Marketplace ... Analysts
Spinning ... Employees
WorldCom ... Enron
Health ... Settlements

Path to this page

Austr Hosp Companies
Mayne Overview
Other pages

Entry to Privatisation
Privatisation Background
Australian states
Gen. Pract. Corporatisation

Hospital Companies

Affinity Health
Alpha Healthcare
Austr. Hosp. Care
Hosps of Austr (HOA)
Insurer hospitals
James Hardie & HCC
McGoldrick's comps
Markalinga & AME
Mayne Health & HCoA
Moran Healthcare
Nova Health
Ramsay Hlth Care
US grps HCA & AMI

Small Hosp groups

Mayne Pages
Mayne access page

1886-1994 - - - refs
Collusion - - - refs
1995-2000 - - - refs
Clippings 1998
Conflicts&Scan scam
2000-2001 - - - refs
Smedley - - refs
Health Story

Affinity Hlth & Citigroup
2004-2005 Break up
Mayne Diagnostics
Restrict Mayne

This page examines available information about the three Venture Capital groups that have purchased Mayne Hospitals. It documents the way in which Citigroup's ownership was carefully omitted from reports in the Australian press so that the public was unaware of the nature and track record of the purchaser.

Australian section     

The Companies Buying Mayne Health

See also the web page "Mayne Health becomes Affinity Health" which descibes the management buyout and the prospects for the new Affinity Health.



CVC Asia Pacific

GIC Singapore

Ironbridge Capital

Update August 2004

NOTE:- After writing this page an article, "Hazards in the Corporatisation of Health Care" which I wrote to expose what had happened was published in the Autumn 2004 edition of NEW DOCTOR (copyright), the journal of the Doctor's Reform Society <>.

Click Here to download copy of the paper as a pdf file.


On another page I have examined the sale of Mayne hospitals to a consortium of private venture capitalists and the significance of the changing dynamic which this entails for health care. On this page I will examine the companies involved in the purchase of Mayne's hospitals with the exception of Citigroup, the most important.

Citigroup has been hidden in the paper trail behind the name CVC Asia pacific, its "wholly owned" subsidiary. Citigroup has been at the centre of a series of massive complex scandals in the USA, some relating to health care. It is undoubtedly the moving force behind the purchase of Mayne hospitals. I have devoted several pages to its history, its conduct and the threat that it poses to our health system. None of the other companies has any experience in health care.

Three companies are listed in the purchase of Mayne hospitals. The proportional interest and influence of each is not known but CVC Asia pacific is referred to as the leader and acts as spokesperson for the consortium.

They are:-

CVC Asia Pacific:- Not disclosed in the debate about Mayne's sale is that CVC Asia Pacific is a wholly owned Citigroup joint venture between itself and its European operator CVC Capital Partners, also a member of Citigroup. The exact legal relationship is far from clear. Media reports reflect the slant which suits the company at any particular time, rather than the result of any investigative journalism.

GIC Singapore:- Founded in 1981 GIC Singapore is a foreign investment vehicle for the Singapore government. It is characterised by a high profile in Singapore and a lack of available information and true accountability. The Straits Times (Singapore Oct 22,2003) indicates that it " manages more than US $100 billion (S$175.4 billion) in Singapore investments overseas.

Ironbridge Capital:- This is a recent breakaway from Australia's Gresham division by a group of directors. Gresham in turn is a London based management buyout from Zurich financiers, a giant Swiss multinational. Ironbridge is unlikely to have the wealth to hold a significant share of the hospitals.

I have searched out reports about these venture capitalists over the last several years. With the exception of Citigroup none of these have had any experience in running hospitals or in providing health care. Their mode of operation is to buy businesses and make them profitable enough to float on the share market or sell at a large profit. They have been successful at this.

They are risk takers and no one expects them to behave in a socially responsible manner. They have consequently not previously been welcomed into areas where the ruthless pursuit of profit can have socially unacceptable consequences. There have been few ethical or societal conflicts to confront. The directors they appoint to the companies they buy for short periods have not yet been tempted into fraud or other illegal practices.

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CVC Asia Pacific

It is clear from the press reports that CVC Asia Pacific is the key organisation in the buyout of Mayne hospitals. It is quoted as the turnaround specialist. Most pronouncements about the deal and plans for the hospitals come from CVC Asia Pacific managing director John Cummins.

Who is CVC Asia Pacific?

The question about who owns and controls CVC Asia Pacific is readily resolved when we examine press reports predating the scandals surrounding Citigroup in the USA.

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Well yes it is Citigroup

The Business Times in Singapore and the South China Morning Post (Hong Kong) on February 16, 2000 both described exactly how the recent joint venture CVC Asia Pacific had been set up and the arrangement. It stressed the point that "CVC Asia Pacific is a wholly-owned subsidiary of Citigroup". A Citigroup banker, previously "chief executive of Citicorp's regional private equity investment team" was put in charge. Later the Korea Times describes it as "the investment arm of CitiGroup"

If the new company is wholly owned by Citigroup then CVC Capital Partners, the joint partner must also be a part of Citigroup. It is clearly considered by Citigroup and CVC Capital Partners to be such.

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And in Australia

In 2000 and 2001 The Sydney Morning Herald and the Canberra Times both describe the company as "CVC Asia-Pacific, part of Citigroup Inc". The Australian Financial Review (AFR) variously describes the relationship as "Citibank-managed CVC Asia Pacific Ltd", and "a private equity venture between CVC Capital Partners and Citigroup". The AFR, Townsville Bulletin and Brisbane's Courier Mail write of "Citigroup's Asian investment arm". The Daily Telegraph and the Courier Mail refer to "the Asian offshoot of Citigroup". The Age calls it "the Asian equity arm of Citigroup" The London Evening Standard describes it as "a joint venture between CVC, headed by chairman Mike Smith, and Citigroup of Hong Kong". The Hobart Mercury and the Australian call it a "Citicorp affiliate".

The Weekend Australian and BusinessWorld (Philippines) both call it a "member of Citigroup". BusinessWorld also says " CVC Asia Pacific advises units of its parent company, Citigroup, on investments in the Asia-Pacific Region" This paper continues "CVC Asia Pacific is also adviser to the General Partner of CVC Capital Partners Asia Pacific L.P., which was launched earlier this year by CVC Capital Partners, one of the leading private equity groups in Europe".

All these reports were during the years before Citigroup's name was tarnished by scandal. The fact that Citigroup and its mighty Citibank managed the company was a plus. No one was talking about health care or fraud.

That CVC Asia Pacific, a Citigroup member is the lead organisation and turn around agent in the Mayne purchase is not surprising. Citigroup's subsidiary Salomon Smith Barney was urging the break up of Mayne as long ago as 2000.

It is understood Salomon Smith Barney has approached potential buyers of the group's businesses in recent months in an apparent attempt to put together a consortium to push for a break-up. Price Fall Puts Focus On The Mayne Game Australian Financial Review March 11, 2000

Smith Barney must have been frustrated by Mayne's strange inability to mimic the success of the US giants. These health megacorps parade their commercial success at the annual conferences run by Smith Barney's corporate health division in the USA. Citigroup and Smith Barney provide business advice, financial services and banking expertise to them.

The problem in the USA is not the staggering success of the health care corporations but the way that success is achieved. In the USA business enthusiasm for profit renders enthusiasts deliberately blind to the consequences, for citizens and society, of aggressive business practices common in the rest of the corporate marketplace.

Some health policy experts like Uwe Reinhardt, an economics professor at Princeton University, see the situation as "brutal and inhumane." But, Professor Reinhardt said, doctors and hospitals are trapped in it.
Mark Pauly, a professor of health care systems at the Wharton School of the University of Pennsylvania, said there was no real villain. "I don't think it's exactly good versus evil," he said, "it's just business."
Medical Fees Are Often Higher for Patients Without Insurance New York Times April 2, 2001

Citigroup has a vast experience in working with, investing in, and advising the US Healthcare megacorps which have achieved the 30% profits the venture capitalists are looking for in Mayne. Mayne currently struggles to make profit rather than a loss.

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Deceiving Australians

A responsible and free press? During 2002 and 2003 the massive Wall Street scandal unfolded. You would have thought Citigroup's ownership of CVC Asia Pacific would have been a matter of considerable interest to all those citizens dealing with the company, and particularly those about to buy the shares in the companies CVC Asia Pacific was planning to float. The newspapers all knew CVC Asia Pacific was part of Citigroup and the fraud had been reported in our press. Australian investors could be vulnerable to the same deceptive practices.

Surely the press had a responsibility to keep them informed. The scandal in the USA alleged that Citigroup's supposedly independent analysts were collaborating with bankers to deliberately mislead investors by beating up companies simply in order to deceptively boost the floats which its banks were managing. Citigroup, a company deeply involved in the US corporate health care marketplace was buying Australian hospitals. Our health regulations have probity provisions although they are frequently not enforced by government regulators.

At the same time as business was welcoming Citigroup and newspapers were concealing its presence past Citigroup bankers and analysts were fronting a US congressional investigation into deceptive reporting practices and their possible complicity in the US $2.7 billion HealthSouth fraud.

This surely would have been a matter of intense public interest; particularly given the extensive problems with health care corporations in the USA and our past unfortunate experiences with some of these corporations in Australia.

This experience has included Tenet Healthcare (over $1 billion in fraud settlements, the misuse of patients for profit), Columbia/HCA (US $1.7 billion fraud settlement), Sun Healthcare (understaffing nursing homes to increase profits, bankruptcy after government blocked its charging practices) and HealthSouth (US $2.7 billion accounting fraud)

I believe every responsible Australian citizen would expect a responsible press and ethical journalists to act in our interests by reporting on Citigroup's misdemeanours, mentioning Citigroup's ownership of companies in the news and speculating on where similar practices might have occurred in Australia so that they can be circumspect. These journalist are no less culpable than the US analysts who misled and deceived the investors who trusted them to be honest.

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Reporting in Australia:- CVC Asia Pacific has been active in Australia during 2002 and 2003. There have been frequent press reports describing purchases and planned floats. As the scandal unfolded the number of references to Citigroup's ownership of CVC Asia Pacific in the Australian press declined. The last clear reference was made in the Herald Sun on September 17 2002.

During 2003 Citigroup were targeting Mayne hospitals. During that period there were large numbers of reports on CVC Asia Pacific's investment in Australian corporations and their interest in Mayne's hospitals. Only one article in the Australian Financial Review on 31st July hinted at a relationship when it wrote "Citigroup, whose parent is tied to CVC in Asia". The report described Citigroup's interest in managing the planned CVC Asia Pacific float of the Pacific Brand clothing company.

That Citigroup were buying Australian hospitals would have been an embarrassment for the Mayne purchase. Citigroups reputation was in tatters and US style Healthcare was an absolute "no no" in Australia and most of the world. It would have been of intense concern to Australian citizens, particularly those familiar with the USA. Australian press reports were fascinatingly silent.

During 2003 the major papers reported the rumours, then the unfolding bids to purchase Mayne hospitals. Probably every newspaper in the country reported the sale of Mayne's hospitals to the consortium led by CVC Asia Pacific. I searched the Australian press data bases and could not find one which told us who they were although several told the story of the minor partner Ironbridge.

The only exception was Alan Kohler writing in The Age on 22 Oct 2003. He describes this wholly owned Citigroup company buying our hospitals as "CVC Asia Pacific, the local subsidiary of Europe's biggest private equity firm". He did not acknowledge an email pointing out his mistake and asking him to correct it.

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International reporting:- International reports have been far more informative. It was a Canadian appalled by the rape of citizens during the Wall Street scandal who first drew my attention to Citigroup's purchase of our hospitals.

A Reuters report on 21st October 2003 by Sonali Paul at the time of the hospital sale states "CVC Asia Pacific is a Hong Kong-based joint venture of Citigroup and CVC Capital Partners".

Many believe Singapore to be an authoritarian state and its press censored - not like Australia!. In June, September and October 2003 both the Business Times and the Strait Times were still reporting Citigroup's ownership. Every time these papers mentioned CVC Asia Pacific they mentioned its links to Citigroup.

CVC is the Asian Pacific venture capital arm of Citigroup focused on substantial investments in Asian companies. Since 2000, CVC Asia Pacific has completed 11 investments in the region including Singapore, Japan, Korea, Hong Kong and Australia. SingTel sells Yellow Pages The Business Times Singapore June 3, 2003

International reports describing the sale of Mayne's hospitals similarly reported CVC Asia Pacific's relationship to Citigroup. They also made it clear that CVC Asia Pacific was the leader in the consortium. The management buyout was hardly commented on and was clearly not significant for them.

Dow Jones International News
A group that includes Citigroup Inc.'s (C) CVC Asia Pacific and the Singapore government's GIC Special Investments, will buy Mayne's 53 hospitals in Australia and Indonesia. Australia's Mayne Group Sells Ailing Hospitals October 21, 2003

CVC, a joint venture between CVC Europe and Citigroup (C), jointly led a group that agreed Tuesday to buy Mayne Group Ltd.'s (MAY.AU) 53 hospitals in Australia and Indonesia for A$813 million.
CVC's partners in the Mayne purchase includes private equity group Ironbridge, the Singapore government's GIC Special Investments and hospital managers
CVC Plans Australian Hospitals IPO In 2-3 Yrs October 22, 2003

On Tuesday, Mayne sold its hospitals to a group that included Citigroup Inc.'s (C) CVC Asia Pacific and the Singapore government's GIC investment group. The winning consortium included some managers of the Mayne hospitals. Australia's Ramsay Refocuses On Aged Care October 23, 2003

The company agreed in October to sell its portfolio of 53 hospitals in Australia and Indonesia for A$813 million to a group of investors that included Citigroup Inc.'s (C) CVC Asia Pacific Ltd. and the Singapore government's GIC Special Investments. Australia's Mayne Unwraps A$500 Mln Buyback December 2, 2003

The Asian Wall Street Journal
A group that includes Citigroup Inc.'s private-equity group CVC Asia Pacific and the Singapore government's GIC Special Investments, will buy the health-care company's 53 hospitals in Australia and Indonesia. Mayne Reaches Agreement to Sell Hospital Assets October 22, 2003

CVC, a joint venture of Citigroup Inc. and CVC Capital Partners Ltd., led a group that agreed Tuesday to buy Mayne Group Ltd.'s 53 hospitals in Australia and Indonesia for A$813 million (US$568 million). CVC May List Hospitals Portfolio October 23, 2003

South China Morning Post
Last week's A$800 million (HK$4.34 billion) sale of Melbourne-based Mayne Group's hospitals operation has confirmed Hong Kong-based CVC Asia Pacific as one of the most active private equity players in Australia.

Private equity investment in Australia is expected to pick up this year and CVC Asia Pacific - a Citibank affiliate and a unit of CVC Europe - has secured a range of assets. CVC's local unit braces for a surge in private equities October 27, 2003

Only the Daily Deal, a newspaper whose circulation depended on reporting exciting big deals and perhaps on the support of the giant deal makers in advertising hid Citigroup's role and like Alan Kohler of The Age linked it to CVC Capital Partners.

Daily Deal
Australia's biggest healthcare company, Mayne Group Ltd.- - - - - sale Tuesday, Oct. 21, of its hospitals division to a group led by buyout firm CVC Capital Partners. CVC scores Australian hospitals October 22, 2003

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Is there a Conflict of Interest? On this web site I have explained social dysfunction in the US health system as the behaviour of people whose responsibilities to the community conflict with their own self interest and/or that of their employer - where there are also strong pressures to put the latter first. Excessive market competition is one such pressure. In the marketplace conformity in antisocial behaviour can become a matter of corporate survival.

If we reverse the explanation then we can ask whether there are conflicts of interest between the newspapers' duty to properly inform the community, and pressures to support the marketplace in Australia - pressures which do not seem to exist in Singapore, Hong Kong and China.

Citigroup in the USA has been heavily penalised for deceptive practices in IPOs and other share transaction. It has been fined for conspiring in fraud using opaque structured financial techniques to generate illusionary profits.

In Australia Citigroup is buying distressed subsidiaries of companies, making them profitable and then floating them as independent companies through IPOs. It is promising to generate a 30% profit from Mayne hospitals. Would any ordinary Australian who knew of Citigroup's track record and the way in which a false profit stream can be generated by structured finance buy these shares? By any measure this would be unwise. There seems to be a clear duty to inform and this did not happen. The press cannot claim ignorance as they all reported this relationship earlier.

I do not know enough about the Australian press and its world to speculate on whether advertising or other newspaper activities would have been compromised by reporting CVC Asia Pacific's Citigroup membership in Australia, or whether CVC and Australian Newspapers share large institutional shareholders. One wonders how the proposed Mayne hospital sale or the other Australian buyouts by CVC Asia Pacific could have had sufficient leverage on the papers to stop them publishing responsibly.

I can only speculate as it is not logical to argue from effect back to cause. There may be other factors that give rise to the same disturbing behaviour.

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Who are CVC Capital Partners?

Who then are CVC Capital Partners? Alan Kohler tells us that CVC Capital Partners are "Europe's biggest private equity firm". Could CVC be Citicorp Venture Capital? Alan doesn't tell us!

Well it just so happens that "Citicorp Venture Capital" has been Citicorp and later Citigroup's US venture capital business and it has spawned a number of companies with CVC in their names across the world. It has changed its name to Citigroup Venture Capital but is commonly referred to as CVC. Since the early 1980's Citigroup has run its global venture capital business through offices in Citigroup's banks at least in Germany, Paris and London.

In the 1980s it was variously described as "one of Citibank's sister companies", a Citicorp subsidiary, "part of Citicorp of the US", "venture capital arm of Citicorp Investment Bank", and "venture capital financing organisation of Citicorp International Bank, subsidiary of parent Citicorp." In 2000 Citigroup Venture Capital was still "the New York-based venture capital arm of Citigroup"

CVC Capital Partners was formed in 1993 taking over Citicorp Venture Capital's international business. This was restructured in order to escape US banking regulations; regulations which restricted their competitiveness in Europe.

If CVC Capital Partners is not part of Citigroup then it is about as close as you can get without being a part! If we go back to 1993 when Citigroup was still Citicorp we get the story.

CITICORP, the US banking group, has spun off its European venture capital activities into an independent company, CVC Capital Partners.

CVC will be wholly owned by Citicorp's existing European management team.
This move will free the venture capital operations from US banking regulations which have in the past limited the scale of their activities.
Citicorp has signed a long-term agreement to provide funds to CVC, said Mr Michael Smith, managing director of venture capital operations. He declined to disclose exact figures but the Dollars 550m package available comprises this Citicorp commitment, the existing venture capital portfolio and Dollars 150m of funds raised two years ago.
Nine of Citicorp's 36 European venture capital executives will become shareholders in the new company.

Mr Peter Burnim, managing director of corporate finance at Citicorp, said the new arrangement brought its venture capital business into line with common industry practice. Citicorp spins off venture side Financial Times (London,England) July 2, 1993

So the management buyout was in order to escape the more onerous US banking regulations - a common industry practice. Citicorp is still funding and supporting the enterprise. Citicorp still considers the company to be "its venture capital business" part of what later became Citigroup. The New York Times in 1994 describes CVC Capital Partners as "an investment unit of Citibank also based in New York". In 1996 it was "a unit of Citicorp".

We can reasonably infer that, putting legal hair splitting aside, CVC Capital Partners is Citigroup's international venture capital business, and that it is structured to evade US regulations. A more recent report confirms that CVC Capital Partners has acted for Citigroup in its European activities over the years.

CVC Asia Pacific is only one of the non-competing closely linked ventures entered into by Citigroup Venture Capital and CVC Capital Partners. Sterling Square Capital Partners was set up in Europe in 2002 with directors from both groups.

Continental Venture Capital Limited, a market listed company investing in "property and health" has been mentioned in the Australian press. It is registered at 259 George Street Sydney. It changed its name to CVC Limited on 22 August 2003. Its relationship with Citigroup is unclear.

An English language web site in Amsterdam proclaims itself as CVC Europe (CVC Capital Partners) with an address at the World Trade Center, Schiphol Airport. The American spelling of centre could be a telling Freudian slip?

Other variously named "CVC" investment companies are referred to many times in the non US world press. They have done business across Europe, Australia and South America.

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CVC Asia Pacific's business activities.

The company was set up jointly by CVC Capital Partners and Citigroup in 1999. It was headed by a Citigroup banker. CVC is described as " a large European private fund management concern that specialises in management buyouts and acquisitions".

THE Citicorp group is teaming up with CVC Capital Partners to invest US$ 750 million (S$ 1.27 billion) in industrial and service companies in Asia, said Citibank yesterday.
The fund will initially focus on companies in China, Hongkong, South Korea, Singapore, Taiwan, Thailand, Australia and Japan.
CVC Asia Pacific is a wholly-owned subsidiary of Citigroup
Citigroup, CVC set up fund for Asian buyouts Business Times (Singapore) February 16, 2000

Targets will be in the manufacturing, services, media, telecommunications and distribution sectors. However, the fund will not invest in natural resources, infrastructure or property development businesses.

It (a US $750 million investment program) will be managed by a 20-member team with advice from CVC Asia Pacific, a wholly owned subsidiary of Citigroup.

CVC Asia Pacific, headed by the former chief executive of Citicorp's regional private equity investment team, Vincent Fan, will draw on CVC's experience in takeovers in Europe and Citigroup's merchant banking experience in Asia. CVC unveils US$ 750m fund South China Morning Post (Hong Kong) February 16, 2000

Note that CVC Asia Pacific draws on the experience of other Citigroup subsidiaries and in health care this is likely to be Salomon Smith Barney.

CVC Asia Pacific has bid for or owned companies involved in distribution businesses, climate control (Korea), dairy foods, Impulse Airlines, circuit boards, corrugated paper packaging (Philippines), marketing services, sugar, water heating equipment, clothing (Pacific Brands in Australia), Korea Telecom, Hong Kong Yellow Pages, Singapores's Yellow Pages, hair care, cosmetic accessories, leisure and hospitality, and large retail stores.

It has never looked at health care.

At a time when others are cautious CVC Asia pacific is beating up the prospects for IPO's. That's where he makes his money.

Mr Cummings and his team are also talking up future Australian opportunities.

It is a sentiment shared by KPMG's research, with the top-five accounting firm predicting that private equity investment is set to pick up after a lacklustre 2002. CVC's local unit braces for a surge in private equities South China Morning Post October 27, 2003

There has been some speculation around the market that Pacific Brands may be priced for its ASX float next year on a less strenuous multiple than originally planned, given the frosty reception to some of the major listings in the past few months.

The Foster's Group pubs spin-off, Australian Leisure & Hospitality, has been a poor performer, and although it gained 4 ¢ yesterday to close at $2.30 it is still well below its institutional bookbuild price of $2.50.

Automotive parts retailer Repco has also struggled after its shares were issued at $2.65 each in a $405 million float.

It closed 5 ¢ down yesterday at $2.49. New Director Named For Pacific Brands Australian Financial Review December 11, 2003

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Pacific Brand as Example

The structure of the Mayne deal will be similar to the Pacific Brands buy-out put together by CVC and Catalyst - and almost identical in size ($780 million versus $789 million). Hospitals Warm To Cooke's Kind Of Curry The Age (Melbourne) October 22, 2003

One of the models used to describe the plan for Mayne hospitals is the purchase of the poorly performing Pacific Brands clothing group from Pacific Dunlop in October 2001 for $730 million by a group of venture capitalists including CVC Asia Pacific.

The company owned and sold house hold brands like Bonds, King Gee, Holeproof, Berlei, Hush Puppies, Slazenger, Dunlop, Stubbies, Jockey, Razzamatazz, Wonderbra and Kylie Minogue's Love Kylie range.

The company was "turned around" by some reorganising and by a massive marketing blitz centred on Pat Rafter and Kylie Minogue. It is planned to float it early in 2004 for $1.2 billion and the press are already beating it up. No one is mentioning Citigroup's ownership or practices.

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CVC Capital Partners European Business Activities.

CVC Capital partners is the old European division of Citicorp's US based multinational venture capital company Citicorp Venture Capital. To escape onerous US regulations it was spun off into a company owned by Citicorp Venture Capital's managers in 1993. It remained an "investment unit of Citibank" and Citigroup has continued to do business through it.

They (CVC) are managed by a team of 44 investment professionals based in nine European offices and they scour the market for opportunities.

Over 30 CVC funded companies have gone public on the London, New York, Amsterdam, Brussels, Milan and Paris stock markets.

About two-thirds of CVC's portfolio are manufacturing companies while service industries make up 18 per cent, retail, 10 per cent, and distribution, 6 per cent.

Since it was formed in 1981, CVC has acquired about 180 companies for US$ 24 billion. In the last 2-1/2 years alone, CVC has bought businesses worth US$ 10 billion. CVC starts US$ 750m fund for Asian buyouts Business Times (Singapore) June 4, 1999

CVC Capital Partners increasingly called simply CVC in UK newspapers is the largest private equity group in Europe with a wide range of ventures across Europe and even Australia. Its business is looking for the short term buck. It has invested in a vast range of ventures including water, betting, building materials, chemicals, aluminium foil, clothing, shops, bookies, packaging, paper manufacturing, fishing-lure making, and even managing and cleaning Buckingham Palace and government buildings in London. I could find no record of its ever investing in health care.

In Australia CVC Capital Partners bought laminex maker Amatek in 1998 for $965 million before CVC Asia Pacific was formed. CVC Asia Pacific distanced itself from this unsuccessful venture in 2001 claiming that it had nothing to do with this business. In 2002 it acted for CVC Capital Partners in trying unsuccessfully to float the company for $650 million and then sold it privately.

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Citicorp Venture Capital

Citicorp Venture Capital has continued to operate in the USA and internationally particularly when buying global companies. In South America it entered into a venture capital business with a Brazilian banking group called Opportunity forming CVC/Opportunity. This got into some sort of trouble in the Caymen Islands where it faced liquidation. There was bad blood in the organisation and institutional investors eventually ousted Opportunity from management.

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GIC Singapore

The recent businesses in which GIC Singapore has been involved or interested in bidding for in Australia include the massive Loy Yang power station in Victoria. It set up the James Fielding Mezzanine Capital Fund, looking to invest A$100 million in high-yielding property debt. It bought the Queen Victoria building in Sydney. Subsidiary GIC Real estate has bought several prestige hotels including the Park Hyatt Melbourne hotel. GIC has spent A$ 750 million on property. GIC joined with the Gresham group in supporting the management buyout of the profitable Riviera luxury boat builder on the Gold Coast.

GIC has been involved in Malaysia, Indonesia (banks), Thialand, Taiwan, China, India, Japan, Germany, London, Paris, the USA including Chicago and Silicon Valley. In 2001 The Australian examined what it could find out about GIC's global investments, their successes and failures. Singapore's famous elder statesman Lee Kuan Yew was its chairman and his family was well represented.

While the GIC ostensibly invests national reserves -- a massive pile built on taxes and a mandatory state pension plan -- the average Singaporean is forbidden from knowing where and how effectively the collective nest egg is spent. Mystery (money) Island The Australian November 14, 2001

GIC seems to have concentrated on safer ventures like property investments and to be averse to too much risk. In 2000 GIC joined with what the Courier Mail describes as "Citigroup's CVC Asia Pacific" and others in funding the failed low cost Impulse Airlines. GIC was the first to become nervous and pulled the plug within a year when the anticipated quick profits did not materialise. Could it have had anything to do with a ripple on effect from the low fares Impulse charged affecting Singapore Airlines?

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Ironbridge Capital

Once again the public do not now know who is involved in funding their care. The reports in the press are contradictory, obscure and incomplete. You would need to fork out a minimum of $20 to reporting agencies on multiple occasions to get information about the various companies registered. It seeems that the Mayne purchase is Ironbridge's first venture.

Here are the press comments

Ironbridge (the old Gresham private equity group). MacBank Trusts In Social Clime Australian Financial Review September 9, 2003

Ironbridge was set up this year by four former directors of Gresham Private Equity. UPDATE 2-Australia's Mayne quits hospitals for A$813 mln Reuters Oct 21, 2003

Ironbridge Capital, a local private equity firm Mayne survives hospital stay The Age October 22, 2003

Ironbridge, the private equity firm started in April by a group of four men who walked out of Gresham Partners Hospitals Warm To Cooke's Kind Of Curry The Age (Melbourne) October 22, 2003

In addition, the departure of several managers from Gresham Partners has led to the creation of a new group, Ironbridge Capital VCs Cash In On Float Bonanza Australian Financial Review November 18, 2003

Its first deal, the $A800 million buyout of Mayne's private hospitals operation, involves Ironbridge in a syndicate with the Singapore Government Investment Corporation and CVC Asia Pacific. Ironbridge debuts with Mayne hospitals. Investor Weekly (ABIX Abstracts) November 10, 2003

Ironbridge:- Free information from ASIC shows that IRONBRIDGE CAPITAL HOLDINGS PTY LIMITED was registered in Australia on 26 March 2003. Another company IRONBRIDGE CAPITAL PTY LIMITED was registered on 12 August 2003. Two more entities IRONBRIDGE CAPITAL A PTY LIMITED and IRONBRIDGE CAPITAL B PTY LIMITED were registered on 12 November 2003.

Reports about Mayne indicate that in April 2003 four unnamed directors walked away from the Australian Gresham companies to form Ironbridge. An earlier report from the AFR gives more information. There is also a hint that there may have been some dispute about direction between local and international staff.

The departure of Julian Knights as managing director at Gresham Private Equity in March, followed by other senior managers, has left the close-knit venture capital industry in a state of flux.

Knights and his former bosses at Gresham Partners are keen to leave the past behind. They have preferred not to speak publicly about what was probably at times an acrimonious period. Venture Capital At Crossroads Australian Financial Review May 27, 2003

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There are 75 companies with the name Gresham registered with ASIC. Gresham Partners and Gresham Private Equity are UK based companies and some of these must be their Australian subsidiaries.

Gresham was founded in the United Kingdom in 1925. It became part of British American Tobacco's financial services arm in 1982. "Gresham Capital Partners" set up their Australian operations in the subsequent years and five ASIC companies registered at this time bear this name. When Zurich Financial acquired British American in 1998 Gresham became Zurich's private equity house in London. At the same time two additional "Gresham Private Equity" companies were registered in Australia.

In September 2002 after posting a massive loss Zurich Financial spun off its Gresham operations through a management buyout. Zurich funded five of Gresham's UK managers and committed 265 million pounds over 10 years including money for fresh deals.

It may have been because of this change that the Australian managers decided to walk away and form Ironbridge in April 2003. It is unlikely that Ironbridge managers were able to take much Gresham money or Zurich support with them. Ironbridge's contribution to the Mayne buyout is therefore likely to be small. A report in the AFR on 18 November 2003 indicates that Ironbridge is seeking capital from institutions and this may be for the Mayne buyout.

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Zurich Financial

Zurich Financial has offices in 60 countries. Zurich has been involved in insurance and financial services. Its three home markets are the United States, the United Kingdom and Switzerland.

Zurich has had a subsidiary in the managed care business in the USA and South America. Its subsidiary Zurich Switzerland introduced managed care expertise into that country. This is a long paper trail and it seems unlikely that this unwelcome managed care expertise is available to Ironbridge.

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Gresham's money

In 1999 Australia's Wesfarmers invested $100 million for 7 years in Gresham Private Equity - described as a "newly formed" Australian company. In 2001 Gresham became "Australia's largest dedicated management buyout fund by raising $200 million from superannuation funds".

Mr Chaney (Wesfarmers) also unveiled an innovative $100 million investment in the newly formed Gresham Private Equity Fund, which will target larger size private equity transactions in the areas of management buyouts, expansion capital, and corporate restructuring. Wesfarmers booms on record $179m year Courier Mail August 4, 1999,

The fund is structured as a 10-year closed fund, meaning investors will not be able to access funds for that period, although distributions may be realised intermittently.

Private equity investments such as the Gresham MBO fund have become increasingly attractive to superannuation fund investors.

With large allocations to listed asset classes such as shares, super funds are happy to put money in an asset class which has less correlation with the stockmarket.

Many super funds have increased their benchmark allocation to private equity over the past year, some by up to 20 per cent.

Mr Knights said the Gresham MBO fund was seeking returns of between 25 per cent and 30 per cent a year Gresham's Super Effort Creates $200m Management Buyout Fund Australian Financial Review January 8, 2001

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Gresham investments

Gresham's enterprises in Australia and internationally include building materials, pest control, sanitary waste, hygiene services, computer-controlled taxi and courier dispatch systems, in-vehicle security camera technology, electronic banking solutions, technology for the tax industry, teller machines, mining and infrastructure, providing bailiff and parking enforcement services, outsourcing services, childcare, luxury boat building (with Singapore's GIC), wine making, cash cards, telecom businesses, and health clubs. This range of projects suggests that it will bring a one business approach size fits all business philosophy to hospital services.

One of the models used by analysts to describe the management buyout plan for Mayne hospitals is the purchase of Repco from PacDunlop by a consortium including Gresham in 2001. They paid $252 million and spent $80 million on the company. Having made it profitable they made 110 million (21%) when they floated it for $442 million in November 2003.

Ironbridge is built on Gresham experience and claims this as its track record. The source of their money, their investment in Affinity Health, and the organisations which support and advise them are not known. The description "old Gresham private equity group" is probably inaccurate but Ironbridge's likely behaviour can be gauged from their track record with Gresham.

Click Here to go to the page discussing the sale of Mayne's Hospital and the possible implications.

Update August 2004

Affinity Health was created last year to obtain the hospitals business from Mayne Group, the health-care company, and will raise a minimum of $125 million through the issue of 1.25 million capital notes at a price of $100 each.
The notes are secured over the assets of the Affinity Health Group but they are subordinated to, or rank behind, the senior debt.

The total amount of senior debt owed by the group is $603 million and the original senior lenders are Credit Suisse First Boston, ANZ and BOS International. Investors Have Affinity With Double - Digit Return On Notes Australian Financial Review 17 March 2004

Who really owns Affinity Health?

There is still no readily available information about the relative ownership and control of Affinity Health Care. The press is silent. The buyers had taken a bridging loan in 2003 and went to the market to raise $125 million in notes to repay this in March 2004. The offer was oversubscribed and it raised $150 million.

Incredibly Affinity was not required to disclose the relative share holding of the venture capital owners to the buyers of the notes. We learn that in March Ironbridge held only "nominal equity" but had the right to acquire additional equity. It was at the time raising money to acquire equity. As I interpret this the only Australian venture capitalist in the deal could not raise the cash. In order to give the company a local flavour it got two directors. In March it had not yet found the cash. This may have been the purpose of the bridging loan.

The advice given was based on projected profits given from unaudited balance sheets. KPMG indicated that while it saw no problems in the information in the prospectus it had not been given enough information to audit the company's finances. In spite of this the offer was enthusiastically oversubscribed.

From the prospectus released we get a glimpse of what happened. It seems that in addition to this bridging loan the company has $603 million in seniors debt held by Credit Suisse First Boston, ANZ and BOS International. With a purchase price of $813 million it is not clear just how big a stake each of the venture capitalists has but perhaps not a lot. One must ask what measure of influence and control does this large debt give the multinational financiers?

With Citigroup the moving force behind CVC Asia Pacific this looks more and more like a deal stitched up by the multinational banking and financial giants with the venture capitalists and management simply the vehicle for this. Could it be that, with the collapse of Mayne, the whole for profit private health care industry was threatened and the banks moved to protect their interest in it? They would have received strong political support.

The board

The independent chairman is Paul McClintock, a past advisor to cabinet and an HIC Commissioner. Andrew Cummins, who seems to be the moving force, and Percy King, who hails from Citibank are from CVC Asia Pacific. Michael Choo Sam Lim and Eng Chiet Shoong are from CIG Singapore. Neil Broekhuizen and Tom Tucker are from Ironbridge Capital. Robert Cooke, John Hickey and Robert Wise are executive directors from the management buyout.

Financial stakes

The prospectus indicates that none of the directors of the company have shares or options in the company. All three executive directors hold shares in the company; Cooke 2.8%, Wise and Hickey 1.2% each. As several other members of the buyout team also own unspecified shares the likely holding of management is 10% or higher.

CVC Asia Pacific and Citigroup

It seems that the media ban on linking the two companies has been lifted slightly. In a small section the prospectus indicates that CVC Asia Pacific "operates as a 50/50 joint venture between CVC Capital Partners Europe Limited and Citigroup". It does not reveal the relationship between CVC Capital Partners and Citigroup or that CVC Asia Pacific is wholly owned by Citigroup. The AFR, describing the capital raising tests the water and publishes Affinity's own words but no one in the business world is asking real questions.

Affinity Health comprises CVC Asia Pacific, which operates as a 50/50 joint venture between CVC Capital Partners Europe and Citigroup, GICSI, the private equity investment arm of the Government of Singapore Investment Corporation, Ironbridge Capital, which previously managed the Gresham Private Equity Fund, and senior management. Investors Have Affinity With Double - Digit Return On Notes Australian Financial Review 17 March 2004

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Web Page History
This page created January 2004 by
Michael Wynne
Updated August 2004