MSPEA, Sihuan Pharma invest in Chinese hospitals - UPDATE

The investments are being made through a joint venture in which MSPEA and a Sihuan subsidiary each hold a 38.14% stake, while Euromax, a company owned by Sihuan chairman Fengsheng Che, has the remaining 23.71%.

Capital contributions are commensurate to the respective parties' equity interests, which means MSPEA is putting in approximately RMB473 million.

The first target is HY Hospital in Huai'an city, Jiangsu province. It covers 116,000 square meters and is the city's third-largest hospital in terms of bed count, with 1,085. The facility has 17 functional departments and 24 clinical medical departments. There were 490,000 outpatient visits in 2013 and revenue came to nearly RMB400 million.

The joint venture will pay RMB803.7 million for an unspecified stake, according to a regulatory filing.

The second target is JB Hospital, a facility based in Nanjing, also in Jiangsu, that covers 62,000 square meters and holds 750-800 beds. JB is the only level-three hospital in the city's Liuhe district - which has a population of 920,000 but is expected to expand to 1.5 million over the next five years - and generated revenue of RMB331 million in 2013.

The investors will take a 69.21% interest in JB for RMB409.3 million, although there is the option of increasing ownership of JB to 82% through the acquisition of equity from employee shareholders.

Sihuan is the third-biggest player in China's prescription drug market and the largest cardio-cerebral vascular prescription drug franchise. MSPEA supported management in a privatization of the company - then trading in Singapore - in 2009 before re-listing the business in Hong Kong the following year.

The private equity firm made a partial exit via the Hong Kong IPO and has completed two further share sales since September 2013. The most recent sale, in April 2014, left MSPEA with a 2.92% interest in Sihuan.

A large number of private equity and strategic investors are competing for opportunities in China's hospital space, in part because the segment is expected to benefit from the government's ambitious healthcare reforms.

The country has only two physicians and four hospital beds per 1,000 people and - facing a shortage of high-quality healthcare resources yet increased demand from an aging and increasingly wealthy population - Beijing is encouraging greater private sector participation.

In April of last year, a consortium led by Fosun Pharmaceutical Group and TPG Capital agreed to buy hospital operator Chindex International for $433 million, after seeing off a counter bidder, while in October Hony Capital purchased Shanghai Yangsi Hospital, the largest privately-owned hospital in the city. Hony wants to acquire 10-15 hospitals over the next three years.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Healthcare
• Buyouts
• Greater China
• Morgan Stanley Private Equity Asia
• China
• healthcare
• buyout