Analjit Singh-promoted Max India on Monday said it was getting out of the health care business by selling its majority stake to KKR-backed Radiant Life Care. The deal will lead to the creation of a listed entity, Max Healthcare, with an equity valuation of Rs 72.42 billion.
The deal will see KKR becoming the majority shareholder while Radiant Life Care promoter Abhay Soi will lead the combined company as chairman. Max Healthcare promoters led by Analjit Singh will step down.
The acquisition will be made through a series of transactions. The first stage being Radiant picking up 49.7 per cent in Max Healthcare for $293 million. In the second stage, Max India will demerge its non-health care business, Max Bupa (insurance) and Antara (senior living), into a new subsidiary. In the third stage, Radiant will demerge its health care business into Max Healthcare. In the last phase, the residual part of Max India will reverse merge with Max Healthcare. After the merger, KKR will hold 51.9 per cent stake, Soi will have 23.2 per cent and the Max promoters will only have 7 per cent.
The shares of Max India closed at Rs 80.80 per scrip on BSE, down 4.32 per cent from its previous close. The deal will give the KKR-backed company a stronghold in the health care sector, as it will have 3,400 rooms, from present 900. The merged entity will become the third-largest in terms of revenue among hospital chains and the largest in terms of beds after Apollo Hospitals, IHH, and Narayana Healthcare.
Soi said the plan was increasing the number of rooms to around 5,000. He estimates that the cost per room will range from Rs 10 million to Rs 12.5 million. He will also focus on improving the Ebitda (earnings before interest, tax, depreciation and amortisation) margins of the company, which has been languishing at around 9 per cent. Its Ebitda margins in BLK and Nanavati are 14-16 per cent. Soi said the occupancy rates in Max were already high at 70 per cent, compared to 60-62 per cent in Nanavati and BLK. Earlier, Radiant controlled BLK Hospital and also managed the Nanavati Hospital in Mumbai.
Max India shareholders will receive one share of Rs 10 each of the two new companies from the demerger of Antara and Max Bupa for every five shares of Rs 2 they have in the holding company. As a result of the reverse merger of Max India with Max Healthcare, the shareholders of Max India will receive 99 shares of the merged entity of Rs 10 each for every 100 shares of Rs 2 in Max India.
Delhi and Mumbai are the key markets for the health care industry, as it is in these two markets that the gap between the number of beds available and the demand is the highest, according to Soi.