FORTIS Healthcare has announced that it is buying private equity firm TPG Capital’s 23.9% stake in Singapore’s Parkway Holdings for $685.3 million (Rs 3,080 crore), supplanting Apollo Hospitals as Asia’s largest hospital chain.
Chairman Malvinder Singh, a former owner along with brother Shivinder of pharmaceutical company Ranbaxy Laboratories, said the deal will place Fortis strategically for leadership in Asia and is a big step towards realising its vision of becoming a global healthcare delivery network.
The addition of Parkway’s 16 hospitals and over 3,600 beds in Singapore, Malaysia, Brunei, India, China and the UAE will expand Fortis’ network to 62 hospitals and 10,000 beds.
Chennai-based Apollo Hospitals runs 46 hospitals with over 8,000 beds. It also has an equal joint venture with Parkway in a 425-bed hospital in Kolkata, Apollo Gleneagles.
The deal values Parkway at a 14% premium to the S$3.12 closing price of its share on the Singapore Stock Exchange. Fortis plans to have four seats on the board of Parkway. It will also nominate Malvinder Singh as the chairman of the Singapore company.
The Fortis stock rose to Rs 181.15, its highest level in a year, before closing 4.85% higher at Rs 178.45 on the Bombay Stock Exchange.
Ranjit Kapadia, a pharma analyst with brokerage firm HDFC Securities, said the deal will give Fortis a strong foothold in the southeast Asian market but the company’s balance sheet could be stressed as cash flow from operations are not significant enough to accommodate a large acquisition.
Fortis, which opened its first hospital in 2001, acquired Escorts Heart Institute in 2005 and 10 hospitals from Wockhardt for about Rs 900 crore last year.
It ended two of the last three fiscal years with a net loss and posted a profit of Rs 22 crore in the quarter to December.
Fortis raised Rs 1,000 crore through a rights issue last year and used part of the money to fund the acquisition of Wockhardt’s hospitals. It recently announced plans to raise a further Rs 1,250 crore to acquire hospitals.
After selling India’s largest drug company Ranbaxy in 2008 to Japan’s Daiichi Sankyo for Rs 10,000 crore, the Singh brothers have been aggressively expanding their healthcare and financial services businesses through a series of buyouts.
RELIGARE Enterprises, their financial company, last month bought USbased Northgate Capital, a wealth management provider, for $250 million. In 2008, Religare bought London-based stock broking firm Hichens Harrison for $110 million and the same year it acquired Lotus AMC, which managed over Rs 5,000 crore in mutual funds. Fortis will have to make an open offer if it increases its stake in Parkway to the threshold of 30%. Khazanah Nasional, Malaysia’s sovereign wealth fund, owns a little over a fifth of the Singapore healthcare provider. Its real estate arm, Parkway Life Real Estate Investment Trust, invests in hospital properties in Asia-Pacific. Religare Capital Markets, the investment banking arm of Religare Enterprises, was the sole advisor to Fortis Healthcare for the transaction.
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