Fortis buys 24% in Singapore healthcare giant

Malvinder to be Parkway chairman; acquisition will form Asia’s largest hospital chain.

Fortis Healthcare today announced the largest overseas acquisition by an Indian company in the healthcare space, buying the entire 23.9 per cent stake held by TPG Capital in Singapore’s Parkway Holding Ltd for $686 million (Rs 3,119 crore).

Fortis is India’s second-largest healthcare provider after Apollo Hospitals and Parkway is Asia’s biggest hospital operator by sales. The acquisition would form Asia’s largest hospital chain with over 10,000 beds across 64 hospitals in six countries.

The deal, announced in Singapore on Thursday, will also see Fortis Chairman Malvinder Mohan Singh appointed chairman of the Parkway board. Fortis will replace TPG as Parkway’s single largest shareholder by a few basis points and intends to seek four seats on Parkway’s 11-member board, a statement from Fortis said.

This is the biggest acquisition by the Singh family after it sold its stake in drug maker Ranbaxy to Japan’s Daiichi Sankyo in June 2008 for $4.6 billion.

“The acquisition will significantly expand our footprint across the region and place us strategically for geographical and clinical leadership in Asia, a big step closer to our vision of establishing a global healthcare delivery network,” Malvinder Mohan Singh said.
 

HEALTH CHECK

THE ACQUIRER: FORTIS 

Bed strength 6,600

No. of hospitals 45

Revenue* Rs 174.45 crore

Net profit/Loss* Rs 7.15 crore 

Shareholding pattern# Promoters 76.47, FIIs 2.98, DII 2.22, others 18.33

THE ACQUIRED: PARKWAY

Bed strength 3,400 

No. of hospitals 16

Revenue**  Singapore 

$979.2 million (Rs 3194.2 cr)

Net profit** Singapore 

$124.9 million (Rs 407.4 cr)

Shareholding pattern#: TPG Capital 23.9, Khazanah Nasional 23.32, The Bank of New York Mellon Corp 5.99, Newton Investment Management Ltd 5.99, Franklin Resources Inc 5.98, Others 34.82

*2008-09  ** Jan-Dec 2009  
# Figures in %

Parkway runs 16 facilities and has 3,400 beds across six countries including Malaysia, Singapore, UAE, China and Bangladesh. A listed entity on the Singapore Stock Exchange, it has a market capitalisation of $2.4 billion.

The announcement of the deal just ahead of the close of trading saw the Fortis stock surge almost 5 per cent on the Bombay Stock Exchange to close at Rs 178.35.

“It is a very interesting deal. Fortis is the first Indian healthcare company to become an international company. It will be interesting to see how synergies (between the two chains) will be leveraged, and whether diagnostics will have a key role in that,” said Muralidharan M Nair, partner - health sciences, Ernst and Young.

Fortis, however, has paid a 14 per cent premium on Parkway’s Thursday’s share price.

Industry analysts said the valuation seems to be on the higher side, going by the per-bed acquisition cost.

At roughly Rs 4 crore per bed, this is more than four times the per bed (Rs 75-80 lakh) cost of a greenfield facility in India.

A company statement said the potential synergies include multi-speciality capabilities, exchange of human talent and optimisation of the cost of operations.

"The acquisition will give the combined entity the benefit of an unparalleled medical talent pool in Asia and also access to best-in-class practices thus creating synergies that will help offer global quality healthcare experience across the region," Shivinder Mohan SIngh, managing director, Fortis Healthcare said.

Parkway also runs a hospital in Kolkata through a joint venture partnership with the Apollo. It has another green-field project in Mumbai. The future of Apollo joint venture was not clear. Asked about the development, the company said it would issue a statement but had not done so till this newspaper's release time.

Fortis is already in the process of getting enabling resolutions to raise funds approved by its shareholders. Last months, its board had approved an enabling resolution to raise Rs 1,250 crore via equity or foreign currency convertible bonds to finance its growth requirements .

The board also gave in-principle approval to enhance the company’s borrowing limits to Rs 3,000 crore from Rs 1,500 crore. The company has sought shareholder approval for these decisions through a postal ballot – the results of which are to be announced on March 22.

Fortis, which started out with a single hospital in Mohali in 2001, has grown through acquisitions. Last year the company added 10 hospitals to its network by buying out pharmaceutical major Wockhardt’s hospital business. In 2005, it had acquired five Escorts Hospitals.