Apollo eyes Wockhardt Hospitals

India’s largest hospital chain, Apollo Hospitals, is interested in buying Wockhardt Hospitals provided it gets a majority stake, a top Apollo executive said. “We will not buy a minority stake in Wockhardt Hospitals. We will consider a majority stake and pay a correct price for it if offered,” said the executive, who requested not to be named. When contacted, an Apollo Hospitals spokeswoman declined to comment. At present, Delhi-based Fortis Healthcare is the front-runner to buy Wockhardt at a valuation of Rs 1,000 crore, as reported by ET on April 1. But latest media reports suggest that the talks are stuck over valuation differences. Meanwhile, a Wockhardt spokesman ruled out any plans to sell a majority stake in the hospital chain. The company is looking to sell a minority stake to an investor, he said, but denied any negotiations with Apollo or Fortis. “Such reports are malicious propaganda by rival firms,” he said. However, what kind of a choice the Khorakiwalas have in the matter depends on their ability to raise huge capital in some other fashion in order to meet their debt obligations this year. Their flagship company Wockhardt Pharma is saddled with Rs 3,400-crore debt. According to Crisil data, Wockhardt has to repay Rs 1,324 crore this calendar year. Wockhardt Hospitals’ negotiations with private equity (PE) players such as General Atlantic, Advent International, Blackstone and Carlyle over the past couple of months are also reported to have collapsed. Most of these PE firms had then valued the company at about $250-300 million (Rs 1,250-1,500 crore). About a year ago, Apollo held initial talks to buy Wockhardt Hospitals, the promoters had demanded a valuation of Rs 3,000 crore, the executive said. But negotiations did not move forward due to sharp differences over valuation and the Khorakiwalas’ reluctance to give up a controlling stake in the hospital business. PE major Apax Partners, a strategic investor in Apollo Hospitals, also had initial discussions to invest in Wockhardt Hospitals last year, but couldn’t strike a deal. If Apollo Hospitals joins the fray, it could make for an interesting contest. Apollo Hospitals, which raised $100 million from Apax Partners in 2007, is yet to utilise a part of the fund. Apollo Hospitals, which runs a chain of 43 hospitals, has been looking for an acquisition in overseas markets. It was close to buying a hospital chain in the UK in 2007, and is currently scouting for an acquisition in Malaysia. In India, it has not made any big acquisition. However, analysts believe Fortis heads the race for Wockhardt Hospitals. This is because of the financial muscle of Fortis promoters who have announced aggressive expansion plans in healthcare sector. Besides Wockhardt Hospitals is seen as a strategic fit for Fortis, given the complementary regional distribution of their hospitals.