Aster DM, Blackstone-backed Quality Care announce merger in $5 bn deal

The two companies have merged via a share-swap ratio of 977 shares of Aster for every 1,000 shares of QCIL. Aster shareholders will hold 57.3% and QCIL shareholders 42.7% in the merged entity, Aster DM Quality Care, which will be a listed company.

“The whole idea has been about building the biggest platform, and how do we become the best healthcare provider in India," Alisha Moopen, managing director of Aster DM Healthcare, said.

Also read | Aster DM Healthcare quashes merger rumours: Is Blackstone-backed Care Hospitals still in the race?

The combined entity will have 10,150 beds, with 38 hospitals across 27 cities. With this deal, the merged entity joins Apollo Hospitals Enterprises and Manipal Health Enterprises in the ranks of the three largest hospital chains of India. Currently, Apollo has 10,138 beds according to its Q2FY25 investor presentation, and Manipal, more than 10,500 beds, according to its website.

Aster DM Quality Care plans to add 3,180 beds in the next two years, bringing its total bed capacity to over 13,000 beds by FY27, according to Moopen.

The merger is expected to conclude in 12 months, subject to regulatory approvals. The combined entity would require approvals from bodies like SEBI, CCI, and NCLT, and shareholders.

The new structure

Blackstone will be the largest shareholder in the merged entity with 30.7% shareholding, followed by Aster’s promoters (the Moopens, 24%). TPG will hold 10.2% with the balance being held by public and other shareholders.

Ganesh Mani, senior managing director at Blackstone Private Equity, told Mint that the board will be jointly controlled by Blackstone and Aster’s promoters.

Also read |  Aster DM Healthcare plans to double bed capacity to 10,000 through acquisitions, organic growth: CEO

Aster DM promoter Azad Moopen will continue as the executive chairperson of the merged entity. Varun Khanna, group managing director of Care Hospitals, will come onboard as managing director and CEO of Aster DM Quality Care. A professional management team will continue running the operations.

The combined revenue of the merged entity will be ₹7,314 crore, with ebitda (earnings before interest, tax, depreciation and amortization) close to ₹1,396 crore. With the merger, the ebitda margin improves by 200 basis points (2 percentage points) to 19%. The entity hopes to improve its ebitda margins further with cost synergies that the merger will bring in, Moopen said.

Expansion plans

With the merger, Aster DM, which has a strong footprint in south India, will expand its presence in central India, with new states like Madhya Pradesh, Orissa, Chhattisgarh and Tamil Nadu coming into the mix.

Moving forward, the focus will be on integrating the two entities and leveraging synergies across cost, revenue and clinical models between the two.

Also read |  Aster DM looking for M&As in West, North India: CEO

“One of the key goals is also increasing oncology as a department. Between oncology and cardiology, there is a big focus from both sides to pursue in terms of depth of clinical work that we’re doing," Alisha Moopen said.

Blackstone's ‘healthy’ moves

With the merger, Blackstone furthers its healthcare ambitions in India.

In October 2023, the private equity giant acquired controlling stakes in Care Hospitals and Kims Health in a $1 billion deal. While Mani did not reveal Blackstone’s total investment in healthcare in India, he said that it was their biggest investment in healthcare.

On further acquisition plans, Mani said, “If there are acquisitions that are attractive and make sense, we will keep exploring them."