New Delhi: Radiant Life Care Pvt. Ltd, backed by private equity firm KKR and Co., agreed to acquire control of Max Healthcare Institute Ltd in a complex transaction that will make the combined entity India’s third-largest hospital chain by revenue. The merged entity will operate more than 3,200 beds through 16 hospitals across India and will also be the fourth-largest by capacity, according to a company statement on Monday.

In a five-step process, Radiant will first buy a 49.7% stake in Max Healthcare, a unit of Max India Ltd, from South African hospital operator Life Healthcare in an all-cash deal. Thereafter, Max Bupa and Antara Senior Living, two other units of Max India, will be separated into a new entity and shareholders of Max India will receive one share each of the new company for every five shares held.

Radiant Life will then merge with Max Healthcare, giving KKR and Radiant promoter Abhay Soi a majority stake in the combined entity. In the combined entity, KKR will own 51.9% and Soi 23%. Analjit Singh, the founder of Max India, will cease to be a promoter in the merged entity and have a 7% stake after selling 4.99% to KKR in the merged entity. Around 17.8% of the company will be held by the public.

Soi will lead the combined entity as its chairman.

The move will end Singh’s entrepreneurial journey in the healthcare space that he started more than 15 years ago. He will, however, continue to build his other businesses, including insurance and real estate.

“We are always saying: Are we the natural owners of this business? And our view is that we have almost ceased to be natural owners of the business," Singh said in an interview.

“If the business doesn’t grow, by definition it dies. So how do we encourage the legacy and the sustainability of Max Healthcare, which has now become an institution and the idea is to get fresh capital, fresh operator. That’s what KKR and Radiant will bring to the table," he added.

The merged entity will also become the largest hospital network in North India.

The healthcare space has seen frenetic consolidation activity in the recent past, with aggressive participation from private equity investors. While TPG and Carlyle-backed Manipal Hospitals is close to buying Naresh Trehan-promoted Medanta, Malaysian healthcare chain IHH has bought Fortis Healthcare Ltd.

“It is a very fragmented sector, it is going to consolidate. There will be lot of capital flowing into this industry, led by strong entrepreneurs and very strong management team," said Sanjay Nayar, chief executive, KKR. “Healthcare secularly is the area that has to grow if we make sure that regulations and governments don’t interfere to disturb profitability of this sector. And, at the end of the day, you need a lot of capital because you need to deliver high-class service."

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