South Africa's Life Healthcare increases stake in Max Healthcare

The South African hospital operator will invest up to Rs 794 cr in an all-cash deal pegged at Rs 67.50 a share

Max India, promoted by Analjit Singh, will dilute its stake in the group’s hospital venture Max Healthcare. This will allow its South African partner Life Healthcare Group to increase its stake in the hospital chain to up to 46.4 per cent from its current shareholding of 26 per cent.

As part of the deal, the South African hospital operator will invest up to Rs 794 crore in an all-cash deal pegged at Rs 67.50 a share. However, Max India will retain the right to nominate Max Healthcare chairman as well as the brand name of the hospital chain, said Rahul Khosla, managing director of Max India and current chairman of Max Healthcare.

According to Khosla, the deal, which requires regulatory approvals from the Competition Commission of India and the South African Reserve Bank, among others, is expected to be over by September. After the deal, Life Healthcare and Max India will have an equal stake in Max Healthcare.

World Bank arm International Finance Corporation (IFC) also has a 7.5 per cent in Max Healthcare, which it can either retain or dilute, Max India said. Life Healthcare’s actual investment would depend on IFC’s decision on its stake, it added. Part of the proceeds from the deal will be partly injected in Max Healthcare, while part of it will go to Max India, which will sell a 13.3 per cent stake in the hospital chain to Life Healthcare, Khosla said.

Out of the total Rs 794 crore, Max Healthcare is likely to get up to Rs 383 crore, which will be used to reduce debt and for further expansion in North India. Max Healthcare currently has a debt of Rs 750 crore.

“Max India and Life Healthcare’s joint venture has evolved into a mutually beneficial partnership with a clear meeting of minds on critical decisions such as business development, growth strategies, talent management and driving performance to achieve the highest standards of medical and service excellence,” Khosla said.

At present, Max Healthcare operates through 12 hospitals in North India, whereas Life Healthcare has a network of 62 hospitals in South Africa.