Bengaluru-based hospital chain Manipal Hospitals has entered into a definitive agreement to acquire Columbia Asia Hospitals for an undisclosed sum. According to sources, the deal size may be around Rs 2,100 crore. This is likely to mark the exit of the US-based hospital chain from India.
Private equity (PE)-backed Manipal Hospitals will achieve scale through this acquisition. Size is critical to the hospital business as one gets more leverage in terms of cost.
Manipal Health Enterprises, a privately held entity, posted revenues of around Rs 2,100 crore in 2019-20 and is funding the acquisition through a mix of debt (about 50 per cent) and a rights issue amongst its investors. The combined entity will have a presence of 27 hospitals across 15 cities, with 7,300 beds, 4,000 doctors, and 10,000 employees, making it the second-largest hospital chain in the country, after Apollo.
Columbia Asia will be rebranded as Manipal Hospitals, said Dr Ranjan Pai, chairman, Manipal Education and Medical Group (MEMG).
Manipal Hospitals today operates and manages around 6,000 beds across 15 hospitals. The transfer of ownership is subject to regulatory approvals.
Pai said it is a ‘compelling strategic fit’ and has huge geographical and cultural synergies. “…together with Columbia Asia, we are now bigger, stronger, and uniquely positioned to meet the growing expectations of the communities we serve across the country,” he added.
Sources revealed that the valuation of Columbia Asia’s assets would be around Rs 400 crore or so. Columbia Asia did not reply to an email till the time of going to press. They also claimed that this would mark the exit of Columbia Asia from India.
“They took a strategic call from their perspective. They have a whole bunch of investors that needed to exit; they are like a fund. Retirement health care and retirement homes have been their primary business always. They will continue to build on that, both in India and abroad,” revealed a source close to the development. Manipal has already started the integration process. Dilip José, managing director (MD) and chief executive officer (CEO) of Manipal Hospitals, did a townhall with 1,000 people from the Columbia Asia team and explained the way forward.
No manpower rationalisation is planned. The current gaps in Columbia Asia’s organisation structure make it easier to integrate at the top. José is likely to be the MD and CEO of the combined entity, said a source close to the development.
José said that apart from a geographical fit (Manipal will now have hospitals in Pune, Mysuru, Kolkata, etc), the combined entity will now be able to offer a much wider variety to its patients to choose from. “Almost 15 per cent of our outpatient customers come from the East. Now while they can come from a high-end procedure to Bengaluru, they can do follow-ups in Kolkata. Much more value proposition can be on offer,” he added.
Columbia Asia commenced operations in India in 2005 in Hebbal, Bengaluru, and presently operates 11 hospitals across the country in Bengaluru, Mysuru, Kolkata, Gurugram, Ghaziabad, Patiala, and Pune.
The network comprises over 1,300 beds, 1,200 clinicians, and 4,000 employees. Dan Baty, chairman, Columbia Pacific Management, Inc., said the combination is exciting because of a ‘strong cultural alignment’ between the two companies.
Columbia Asia was founded and is managed by Seattle-based Columbia Pacific Management, Inc. In January, Columbia Pacific announced the sale of Columbia Asia Hospitals in Malaysia, Vietnam, and Indonesia to a joint venture between Hong Leong and PE firm TPG.
Manipal Hospitals has not made any acquisitions since 2013. It has decided to back out from buying Gurugram-based Naresh Trehan’s Medanta-The Medicity for Rs 5,800-crore, which was valuing Medanta at roughly 26x its earnings before interest, tax, depreciation, and amortisation. Earlier, Manipal had lost out to Malaysia’s IHH Healthcare Berhad in the race to acquire another Delhi-headquartered hospital chain, Fortis Healthcare.
One of the largest PE players, TPG, had invested in Manipal around 4 years back and roughly holds 22 per cent, while Temasek, which invested 2 years back, holds around 18 per cent. Manipal Health Enterprises had a turnover of around Rs 1,800 crore in FY19. Investors will look for an exit once Manipal Hospitals achieves some scale. The Columbia Asia acquisition helps Manipal to achieve that scale.
Pai-led MEMG, the holding company for Manipal Health Enterprises, has raised over $500 million (since 2006) in 16 funding rounds and has offered 14 exits. Pai holds around 60 per cent in Manipal Health Enterprises.
The advisors to Manipal Health Enterprises was Allegro Capital. Columbia Pacific was advised by Morgan Stanley.