South African hospital firm invests in India's Max Healthcare
South African hospital chain Life Healthcare will acquire at 26% stake in Max Healthcare for INR5.16 billion ($104 million) in what is one of the largest foreign investments in India’s healthcare sector.
The all-cash deal values the hospital subsidiary of local conglomerate Max India at INR20 billion, The Economic Times reported. This is almost 2.5x the valuation that Warburg Pincus obtained on exiting Max Healthcare in June. The private equity firm sold its 16.37% stake to Max India for INR1.4 billion, leaving the parent firm with a 91.84% holding in its subsidiary.
In the stock exchange filing that announced the purchase from Warburg Pincus, Max India noted that it came at a time when Max Healthcare had just turned profitable. Revenue came to INR6.8 billion in the 2010-2011 fiscal year. The company operates eight hospitals in New Delhi and is in the process of opening four more, taking its total capacity to 1,900 beds. It wants to double its bed capacity in the next three years.
Life Healthcare will be issued new shares in Max Healthcare and the proceeds will be used to fund the expansion program as well as pay down some of the company's INR9 billion in debt. Max Healthcare was considering a rights issue to raise funds but this plan has now been abandoned.
As a result of the transaction, Max India's stake in the company will drop below 70% while International Finance Corp. will see its holding fall to less than 3%.
Life Healthcare is worth $1.1 billion and operates 63 facilities with 8,322 beds in South Africa and Botswana.
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