KKR to buy Life Healthcare stake in India hospital JV
KKR has agreed to pay INR4.3 billion ($59.6 million) to South African hospital chain Life Healthcare Group for its stake in Max Healthcare, a hospital operator that it owns through a joint venture with Max India.
KKR will acquire 267 million shares in Max Healthcare at INR80 apiece, according to a filing, giving it a 49.7% stake. Life Healthcare said exiting the asset will enable the company to focus on its core operations in South Africa, the UK, Poland, and Western Europe, while the proceeds can help settle its debt and enable further investments in these markets.
Max Healthcare operates 14 hospitals across three cities in India, providing a range of services including cancer care, cardiology, neurosciences, orthopedics, and weight loss surgery. Life Healthcare acquired a 26% stake in the company in 2011 and later increased its holding to 46.25% in 2014, equaling that of Max India. When the International Finance Corporation exited the company last year, it divided its shares evenly between Max India and Life Healthcare, giving both companies a 49.7% stake.
In its most recent annual report, Max India indicated that overall revenue for the year ended March 2017 came to INR517 million, down from INR682 million the year before. Over the same period, the group went from a net profit of INR143 million to a INR26 million net loss.
Max India, which includes several other former businesses of Max Group such as health insurer Max Bupa, senior living community operator Antara, and Max Financial Services, did not specify how much of its net loss was attributable to Max Healthcare. Life Healthcare, in its latest annual report, said that its share of Max Healthcare’s net loss for the year ended September 2017 came to INR27 million.
The backers identified several challenges for Max Healthcare, including recent regulatory changes such as price controls on cardiac stents that have depressed profits across the hospital industry. Business was also slower than expected during last year’s dengue fever season, and the government’s demonetization initiative caused difficulty for patients to pay for services.
In recent years private equity investors have shown increasing interest in India’s hospital space, where growing demand for quality services is driving hospital operators to seek capital for needed improvements. KKR is already present in the space through Radiant Life Care, in which it invested about $200 million last year for a 49% stake.
Other GPs active in the sector include True North, with a portfolio that includes Kerala Institute of Medical Sciences (KIMS), Manipal Hospital, and Cloudnine Hospitals. Advent International, TPG Capital, and Temasek Partners have all made investments in the space as well.
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