In yet another consolidation in India’s healthcare sector, Max India on December 24 announced a stake sale in its healthcare services joint venture Max Healthcare Institute to Radiant Life Care backed by private equity (PE) firm KKR.
The deal includes Radiant Life's purchase of a 49.7 percent stake in Max Healthcare from South Africa-based hospital operator Life Healthcare International in an all-cash deal, followed by the demerger of Radiant’s healthcare assets into Max Healthcare. This will result in KKR and Radiant promoter Abhay Soi together acquiring a majority stake in Max Healthcare.
Launched in 2000, Max Healthcare is an equal JV partnership between Max India and Life Healthcare, South Africa with each owning a 49.7 percent stake.
Valuation
Max Healthcare was valued at Rs 2,068.3 crore as per the rate of exchange on December 24. Radiant and KKR will be pumping in around Rs 1,028 crore for 49.7 percent stake.
On completion of the transaction, Abhay Soi with 23 percent stake, will take over as chairman of the combined entity, in which KKR will have majority 51.9 percent stake.
Analjit Singh, the founding promoter of Max India will retain 7 percent stake after selling 4.99 percent stake to KKR in the merged entity, as per the company announcement.
In September 2018, Johannesburg-listed Life Healthcare's board accepted an offer from the global investment firm KKR at Rs 80 per share for the Life Healthcare equity shareholding in Max Healthcare Institute Limited (Max).
What will Max India shareholders get?
Under the proposed deal, Max India will demerge its non-healthcare business units Max Bupa Health and Antara Senior Living into a separate company. The spun-off company will be listed on the stock exchanges and the shareholders will receive one share of Rs 10/- each of the new company for every five shares of Rs 2 each they hold in existing Max India.
The shareholders of Max India will also receive 99 equity shares of Rs 10 each of Max Healthcare in lieu of every 100 equity share of Rs 2 each held in Max India.
Launched in 2000, Max Healthcare is an equal JV partnership between Max India and Life Healthcare, South Africa with each of them owning a 49.7 percent stake.
Following consummation of the deal, Analjit Singh and his family will be classified as non-promoters in the merged entity.
Analjit Singh and his family currently own 40.97 percent of the listed Max India, which has other subsidiaries including Max Bupa, which is healthcare insurance joint venture, and Antara, a senior-living platform.
Third largest hospital chain
The Radiant and Max Healthcare combine will create the largest private hospital network in North India, which will be among the top three hospital networks in India by revenue and the fourth largest in India in terms of operating beds.
The merged entity will have revenues of Rs 2,622 crore, and operate over 3,200 beds throughout 16 hospitals, of which 14 hospitals are from Max Healthcare.
The hospitals are primarily concentrated in Delhi NCR and Mumbai. Some of the well-renowned hospitals include BLK Hospital, Max Saket Hospital, Max Smart Hospital, Max Patparganj Hospital in Delhi and Nanavati Hospital in Mumbai.
The scale the deal offers also enables significant potential to extract cost savings, realize synergies and improve margins
The deal to buy Max Healthcare is a major pull-off, by Abhay Soi-led Radiant backed by KKR who were late entrants into healthcare. Radiant forayed into healthcare in 2010 with the re-development and commissioning of BLK, a 650-bed hospital, one of the large private hospital in Delhi-NCR. Besides this flagship hospital, Radiant collaborated with the Nanavati Hospital Trust in 2014 to take over the operations of Nanavati, a 350-bed multispecialty hospital. Over the next four years, Radiant plans to transform Nanavati into an 800 bed state-of-the-art quaternary care institute and expanded BLK by another 200 beds.
Radiant was in the race to buy India’s second largest hospital chain Fortis Healthcare, which was later acquired by Malaysia’s IHH Healthcare for $1.1 billion.
Radiant-Max is the second largest deal in healthcare in India. The Gurugram-based multispecialty hospital Medanta led by India’s leading cardiologist is also up for sale.
"Radiant has achieved significant growth and expansion during a time of rapid industry consolidation, and the proposed acquisition of a majority stake in Max Healthcare marks an exciting step forward in our strategy to increase scale by merging with a leading and complementary hospital network,” said Soi, Chairman and Managing Director of Radiant.
Shares of Max India fell 4.32 percent and closed at Rs 80.80 on BSE. The benchmark Sensex declined 0.76 percent to 35,470.15 points.
With Reuters inputs
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