India's Fortis Healthcare will buy 10 hospitals from Wockhardt Hospitals for Rs9.1 billion ($187 million) as it seeks to create a pan-India presence.
Two of the hospitals are currently under construction and the agreed price of Rs9.1 billion includes Rs1.9 billion of capital towards work-in-progress for these two hospitals. Fortis is adding a total of 1,902 beds to its existing bed capacity.
Fortis Healthcare currently has a network of 28 hospitals (including 12 satellite and heart command centres) with a capacity of around 3,300 beds. The deal is the largest in the hospital sector in India to date.
The acquisition will enhance Fortis's footprint across the country, making it a national player. Fortis is currently strongest in North India.
"This partnership will enable the vast pool of medical talent and quality healthcare infrastructure under the Fortis network to deliver a superior value proposition to the citizens of our country," said Malvinder Singh, group chairman of Fortis and Religare Enterprises.
Two of the hospitals are located in Mumbai, five in Bangalore and three in Kolkata. Fortis will now have an aggregate bed capacity of 5,180 beds spread across 38 hospitals. The company is also taking over the entire team at Wockhardt associated with the hospitals, increasing its talent pool to around 9,250 people, including 1,575 doctors and 5,000 nurses and paramedics.
Fortis was advised on the deal by Religare Capital Markets. IL&FS Financial Services worked with Wockhardt Hospitals.
Fortis set up its first hospital in 2001. Since then it has been growing both organically and through acquisitions. In 2005 it acquired the Escorts Heart and Research Institute from its founders, the Delhi-based Escorts group. Then in 2007 it bought the 180-bed Chennai-based multi-specialty Malar Hospital, giving it a foothold in South India.
Fortis is promoted by the Singh family, who were also controlling shareholders of Indian pharmaceutical company Ranbaxy Laboratories. In 2008 the family sold its controlling interest in Ranbaxy to Japanese pharmaceutical company Daiichi Sankyo at a firm value of $8.5 billion, in one of the largest India inbound M&A deals to date. The Singh family received around Rs96 billion for the shares they sold. At the time, analysts expected the Singh family to deploy some of the proceeds they realised into the companies they own -- financial services group Religare and Fortis -- and this has been happening.
In December 2008 Daiichi announced that Malvinder Singh would continue as chief executive officer and managing director at Ranbaxy and would also be appointed chairman of the board for an initial period of five years. Further, the board of Ranbaxy was expected to comprise six Daiichi directors and four Ranbaxy directors. However, in May this year, in a move that took investors by surprise, Malvinder Singh resigned all his executive positions and his directorship in Ranbaxy. Other Ranbaxy appointees to the board also resigned at the same time. Since then, the Singh family has increased its focus on Fortis, said sources.
Wockhardt Hospitals is the unlisted hospitals subsidiary of Indian pharmaceutical company Wockhardt. The group has been forced to embark on a series of asset disposals this year, since it posted a net loss of Rs1.4 billion for the latest financial year. Earlier this month Wockhardt completed the sale of its animal health division to France's Vétoquinol. In July it sold its nutritional businesses, which included the Farex and Protinex brands, to global healthcare company Abbott Laboratories. And, in June, Wockhardt sold its German business Esparma, which it had acquired in 2004, to a subsidiary of Germany's Lindopharm.
Wockhardt is among the Indian companies that have been caught on the back foot by large hedging losses after the rupee significantly depreciated against the US dollar during the course of 2008. Wockhardt booked Rs5.8 billion of hedging losses in 2008. It is contesting another Rs4.9 billion, which banks are claiming on account of being forced to terminate contracts when Wockhardt defaulted on margin payments. Wockhardt and its lenders agreed a debt restructuring package in July.
Fortis shares traded flat at around Rs117 on India's National Stock Exchange yesterday, which is close to the 52-week high of Rs126. Wockhardt closed down around 3% at Rs172 on the NSE.