INDIA BUSINESS WORLD SEPTEMBER (1st - 15th) 2007
The Month that was ...
FORTIS TO TAKE 46% STAKE IN CHENNAI'S MALAR HOSPITAL FOR RS 26 CRORE
HOSPITAL chain Fortis Healthcare is making its entry into South India by taking over Chennai-based Malar Hospital through its wholly-owned subsidiary International Hospital Ltd (IHL) in association with Ranbaxy group company Oscar Investments.
The Ranbaxy promoter group company has agreed to pay Rs 11.76 crore for buying a 28% stake from the promoters of the 180-bed multi-speciality Malar Hospital, thereby valuing the company at Rs 42 crore.
Fortis, along with another Ranbaxy group company Oscar Investments, will acquire another 18% (of the expanded equity capital) by subscribing to a preferential allotment issue at Rs 30 per share totalling Rs 14 crore, so that the combined stake would go up to about 46%. Of this, Oscar Investments' share will be around 7%. Fortis will also make an open offer for purchasing additional 20% equity from Malar's existing shareholders.
"We picked it up for an enterprise value of Rs 56 crore. The equity value on 100% basis is Rs 42 crore and debt of Rs 14 crore, which takes it to Rs 56 crore," Fortis Healthcare CEO and MD Shivinder Singh told reporters at a press conference here.
"Malar Hospital has a strong brand equity in Chennai and other southern cities and is located at a strategic location. The acquisition marks the beginning of the company's foray in south," he added.
The multi-speciality Malar Hospital will be Fortis Healthcare's 13th hospital and the first in south. Fortis would fund the acquisition through borrowings and internal accruals.
Mr Singh said he was looking for more acquisitions, but ideally sees growth from an equal proportion of new hospitals, acquisitions and management contracts. In 2005, Fortis had acquired Escorts Heart Institute and Research Institute.
Malar Hospital has an accumulated loss of around Rs 20 crore and significant debts in the market. Malar Hospital's whole-time director Dr Nithya Ramamurthy's personal loans are said to be in the region of Rs 24 crore. It is a leading centre for cardiac care, renal transplants, neurosurgery, oto-laryngocoloy, limb reconstruction surgery and maxillo-facial orthodontology. It also has one of South India's most renowned trauma care centres.
The hospital has been up for sale for sometime and hospitals such as Manipal Hospital and Apollo Group had also evinced interest to acquire Malar.
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