Fortis likely to buy 74% of Wockhardt hospitals for Rs750 crores

Fortis Healthcare has emerged as the front-runner to acquire a substantial stake in the unlisted Wockhardt Hospitals, people familiar with the development said. Fortis' promoters have reached a broad agreement with Wockhardt's founder Habil Khorakiwala on a possible deal to acquire up to 74% in the hospital chain for close to Rs 750 crore, valuing the business at over Rs 1,000 crore, the people said. Wockhardt Hospitals is a 100% subsidiary of pharmaceutical company Wockhardt. Private equity firms General Atlantic and Advent were also in the race, but Fortis is close to clinching the deal, they added. Investment bankers said if the deal materialises, Fortis, which is run by Shivinder Singh — the younger brother of Ranbaxy's MD and CEO Malvinder Singh — is likely to invest Rs 400 crore in the first phase for a 40% equity holding, and plans to subsequently increase its stake. But a formal deal is yet to be sealed, with both parties in the process of ironing out differences, including those over branding the hospital chain. When contacted, a Wockhardt spokesperson refused comment. A Fortis Healthcare spokesperson said: "We are in the market. We cannot comment on market speculation or any individual deals." Bankers told ET that Fortis' promoters and Mr Khorakiwala had reached an agreement almost 10 days ago. One banker said Fortis is valuing the hospital chain at over Rs 1,000 crore, which is substantially lower than the proposed IPO valuation, arrived at almost 15 months ago. In February 2008, Wockhardt had sought to divest 24% for Rs 800 crore. The issue had to be withdrawn because of lack of demand. Since the time Fortis entered the fray, investment banking circles have been wary of 'control' issues. The group has, in the past, walked out of deals with other hospitals over differences on management rights. "A staggered deal could be a way out," said an analyst, who argued that selling some pharma assets and a strategic dilution in the hospital business was critical to Wockhardt's fiscal restructuring plans. On Monday, the Fortis scrip ended marginally lower at Rs 66 on the BSE in a weak market. Fortis currently manages 3,000 beds with a network of 26 hospitals, which it plans to increase to 40 by 2012. It will add 1,200 beds soon at new facilities in Vashi in Navi Mumbai, Shalimar Bagh in Delhi and Gurgaon. Industry analysts feel rising incomes and a demand for quality healthcare — with an efficient government-run health delivery system not in place — are fuelling the growth of hospital chains in India. The sector grows at an estimated 10% to 15 % a year. Wockhardt Hospitals, which runs 17 facilities, is planning more at Kolkata, Mumbai and Nashik, which will start functioning within a month. If the deal materialises, Fortis will obtain easy entry into Maharashtra, Bangalore and Kolkata. The deal will take its network strength to 43. Fortis Healthcare is in the process of raising Rs 1,000 crore through a rights issue. The company had said the money would be used to fund its greenfield projects and restructure the balance sheet, besides being utilised for other investments. Additionally, the company plans to raise money through issue of warrants, but the details are yet to be decided.

Fortis buys stake in Malar Hospitals

Fortis Healthcare Limited, the country’s second-biggest health-care provider by market value, is buying Malar Hospital in Chennai, expanding into the southern part of the country for the first time.

International Hospitals Ltd, a wholly-owned subsidiary of Fortis Healthcare, will buy 28 per cent of the equity capital of Malar Hospitals Limited (MHL) from the promoters and an additional 18 per cent by way of preferential allotment.

Seven per cent will be acquired by Oscar Investments Limited. Up to 20 per cent could be acquired through an open offer.

The equity value of MHL, which made its initial public offering in 1992, on a 100 per cent basis stands at Rs 42 crore. The promoters hold about 30 per cent of the 13.9 million shares and the balance is with the public and institutions.

“The acquisition cost per bed for us comes to Rs 32 lakh,” said Shivinder Mohan Singh, CEO and managing director, Fortis Healthcare. “The equity value to the turnover is 1.6 times for Malar, whereas our market cap is 2.65 times. We have picked up the company at Rs 30 per share.”

The 180-bed facility, which was operational in 1995, has three operation theatres and a pathological laboratory.

“Malar is renowned in the south and we are very happy to have acquired the brand. The move will help us in our rollout in south India,” Singh said.

Singh said that Malar, a multispecialty hospital with a focus on mother-child care, may be turned into a superspecialty institution in line with the company’s plans for Chennai.

Over the next six weeks, Fortis will work out the intricacies of the acquisition and decide on further investment that would be required to revamp the hospital.

The MHL acquisition takes Fortis’ total bed strength to 2,200, of which 1,600 are already operational.

Fortis, which runs 12 hospitals in north India, said it plans to operate 40 hospitals with 7,000 beds by 2010 as it seeks to meet demand for high-quality health care. Fortis expects to spend about $500 million on expansion, Singh said last month.

(Source: Economic Times