The consortium of private equity group Abraaj, PD Hinduja Hospital and Everstone Group has emerged as the frontrunner to acquire multi-specialty hospital chain CARE Hospitals from its current owners Advent International, as per a report in The Economic Times. The consortium is competing with rival offers from another combination of South African healthcare chain Netcare, Bain Capital, Singapore’s Temasek Holdings and Baring Private Equity Asia to buy the hospital chain.
The five contenders had submitted bidding offers last month and are currently engaged in final negotiations with the hospital chain, the report said adding that the announcement on the same is expected by the end of this month. Investment bank Moelis & Co and Capital Fortunes are assisting Advent International on the deal that is currently valued at about $270 million (Rs 1,800 crore). At this valuation, Advent will make a near three times return on its initial investment.
The hospital chain had also seen interests China’s Fosun Group, Malaysia’s IHH Healthcare Bhd, private equity heavyweights Carlyle and domestic rivals like Manipal Hospitals for the buyout previously.
American private equity group Advent International had acquired the controlling 72 per cent stake in CARE Hospitals, owned and managed by Quality CARE India Ltd., for $105 million from a bunch of investors including Big Bull Rakesh Jhunjhunwala, Nimmagadda Prasad of Matrix Labs, and UK-based Ashmore in 2012. The remaining stake is held by some of the doctors at the hospital.
Founded in 1997 by Dr B Soma Raju and a team of cardiologists, CARE Hospitals runs 17 hospitals across nine cities in India with a total bed capacity of 2,400. CARE has a presence in Hyderabad, Secunderabad, Visakhapatnam, Raipur, Pune, Nagpur, Bhubaneswar, Jabalpur and Surat. The chain also runs a network of telemedicine hubs in rural Andhra Pradesh and Maharashtra. According to filings from the Registrar of Companies, CARE Hospitals clocked an EBITDA of Rs 39.9 crore on a total income of Rs 397 crore in the fiscal year 2014.
The Indian hospital and diagnostic centres attracted foreign direct investment worth $2,793.72 million between April 2000 and January 2015, according to data released by the Department of Industrial Policy and Promotion. With the acquisition of CARE Hospitals, the acquirer will get the opportunity to cash in on the market that is witnessing a compound annual growth rate of around 13 per cent as affluent Indians get willing to pay a premium for better-equipped facilities.
Dubai-based Abraaj manages $9 billion of assets and has been expanding its focus beyond its original markets including Middle East, North Africa and South Asia. It acquired Aureos Capital in 2012 and launched a billion plus new fund to build new healthcare services in Sub-Saharan Africa and the Indian sub-continent earlier this year.
PD Hinduja Hospital, a part of the $25 billion conglomerate Hinduja Group, has been largely a Mumbai-centric player. CARE fits into its ambitions to grow pan-India. South Asia-focused PE house Everstone sold its stake in Global Hospitals to Malaysia’s IHH Healthcare for Rs 1,284 crore last month.
Some of the more prominent deals in the hospitals’ space include the $171 million investment led by TPG Asia Buyout Fund VI in Manipal Health Enterprises Pvt. Ltd in 2014 and $163 million investment by Carlyle Asia Partners III Lp in Global Health Pvt. Ltd, which runs Naresh Trehan-led Medanta Medicity Hospital, in 2013. Earlier this year, Temasek Holdings Pvt. Ltd acquired another 18 per cent stake in Global Health for an undisclosed sum.