New Delhi: In a deal that could make Fortis Healthcare Ltd the largest hospital company from India in terms of number of beds, and give it a presence across Asia, the firm on Thursday acquired a 23.9% stake in Singapore-based Parkway Holdings Ltd, one of the largest healthcare service providers in Asia. The $685.3 million (Rs3,118 crore) deal is the largest acquisition made by an Indian healthcare services firm.
Fortis acquired the entire stake of investment firm TPG Capital in Parkway in an off-market deal. Under the contours of the deal, Fortis will get four seats on the board of directors of Parkway and Malvinder Mohan Singh, currently the group chairman of Fortis Healthcare, will be the chairman of the board of directors of Parkway.
“Parkway’s strong presence in Malaysia with the Pantai Group of Hospitals gives us great confidence. This 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,” Singh said in a press release.
This is the second big acquisition by Fortis in less than a year. In August, the firm had acquired 10 hospitals from Wockhardt Hospitals Ltd for Rs909 crore, making it the largest ever acquisition in the Indian healthcare sector till then. The deal was funded with the help of a Rs1,000 crore rights offer.
Prior to this, Fortis had acquired Escorts Heart Institute in Delhi for Rs650 crore in 2005.
It first stepped outside India with the acquisition of a hospital in Mauritius last year.
While analysts say that Fortis is wagering a huge amount on Parkway, the deal does catapult it instantly into the big league.
“They have paid a lot, but it is obvious that they would have had to since they are getting four of their people on the board, plus Malvinder will be the chairman,” said a Mumbai-based analyst with a foreign brokerage who is not allowed to speak to the media.
He added that the places on the board would mean that Fortis would have control over decisions at Parkway even though the acquirer may not change the business strategy since “it is a well-run business already”.
The acquisition will also allow Fortis access to all the markets that Parkway has a presence in.
Parkway has a network of 16 hospitals having 3,400 beds spread across Singapore, Malaysia, Brunei, China, the United Arab Emirates, as well as one hospital in Kolkata in partnership with Apollo, and a greenfield project in Mumbai.
The deal will enable Fortis to establish a pan-Asian presence, increasing its network to 62 hospitals with the capacity to increase its bed strength to 10,000 beds.
Dr Lim Cheok Peng, Parkway’s executive vice-chairman and chief executive officer, said: “We are pleased to welcome Fortis as a new major shareholder of Parkway. There are lots of synergies which Parkway can leverage on and we look forward to working with Fortis to take Parkway to the next level.”
It is still unclear how the Indian company will pay for the stake and whether it will enable Fortis to co-brand Parkway hospitals. Fortis officials were not available for comment. Both Malvinder Singh and his younger brother and managing director of Fortis, Shivinder Mohan Singh, were in Singapore.
The Rs1,000 crore rights offer to fund the Wockhardt hospitals purchase was mostly subscribed to by the Singh brothers.
Parkway, a listed entity on the Singapore Stock Exchange, has a market value of $2.4 billion. In fiscal year 2009, it had revenue of $700.3 million. Fortis Healthcare reported revenue of Rs608.4 crore in the nine months ended 31 December 2009.
The Singh family controlled India’s largest drug maker by revenue—Ranbaxy Laboratories Ltd—before they exited it through a sale to Japanese drug maker Daiichi Sankyo Co. Ltd, which paid Rs10,000 crore for their 34.82% stake in June 2008.
The Fortis deal values Parkway shares at S$3.56 each, higher than its Thursday closing price of S$3.12.
Shares of Fortis Healthcare rose at least 5% to a 52-week high of Rs179.20 after the news was announced.
Reuters contributed to the story.