Philippines-based Metro Pacific Investments Corp is raising $684.5 million by selling a 42.5 per cent stake in its hospital unit to a consortium led by private equity firm KKR & Co and has deferred a proposed $1.6-billion initial public offering plan.
As part of the investment, Singapore sovereign wealth fund GIC is restructuring its holding in Metro Pacific Hospitals to join the KKR-led consortium. KKR will make the investment from its $9.3-billion Asian Fund III.
In a disclosure to the Philippine Stock Exchange on Tuesday, Metro Pacific Investments Corporation (MPIC), which holds a majority stake in the hospital group, said KKR and an affiliate of GIC will invest in the hospital unit through a series of investments in common shares in the hospital group and in mandatorily exchangeable bonds issued by MPIC.
Metro Pacific said it was postponing the IPO of the hospital unit, which would have been the country’s largest listing at $1.6 billion. That record continues to be held by Philippine conglomerate San Miguel Corporation that raised $634 million in a share sale last year.
MPIC currently has an 85.6 per cent stake in Metro Pacific Hospitals while GIC owns the rest of the unit.
The KKR-led consortium will subscribe to 41.4 million new common shares in Metro Pacific Hospitals worth 5.2 billion pesos ($100 million). Additionally, the KKR-led consortium will also invest in a 30.1-billion pesos ($580 million) mandatorily exchangeable bonds issued by MPIC, according to the disclosure.
The bonds will give the investors the right to exchange them for 240 million common shares in Metro Pacific Hospitals in 10 years or in the event of an IPO, whichever comes first.
The transactions are expected to completed by the end of 2019.
“After much consideration, we believe we have found the best way forward for Metro Pacific Hospitals and MPIC with this new partnership with KKR,” Jose Ma Lim, President and CEO of MPIC, said.
In a filing to the Securities and Exchange Commission last month, Metro Pacific Hospitals said it planned to sell as much as 457.86 million shares, including an over-allotment option, at a maximum price of 182 pesos ($3.47) per share.
“While we have decided for now to postpone the initial public offering for Metro Pacific Hospitals, I thank all the people involved in helping with this effort. I believe the added dimension KKR brings will help transform the delivery of healthcare services in the Philippines,” Lim added.
Metro Pacific Hospitals is the operator of the largest private hospitals and healthcare network in the Philippines. It holds interests in 14 hospitals, many of which are among the country’s largest and most modern, including the Makati Medical Center, Asian Hospital, Cardinal Santos Medical Center, Our Lady of Lourdes Hospital, De Los Santos Medical Center, and Manila Doctors Hospital.
Last year, the group served 3.8 million outpatients and 194,000 inpatients with more than 3,200 beds.
Metro Pacific Hospitals President and CEO Augusto Palisco Jr said the cash infusion will enable the group to further grow its network to reach its target of 5,000 beds and 30 hospitals before 2030. Proceeds from the share sale were expected to be used to support Metro Pacific Hospitals’ potential investments in additional hospitals and new healthcare businesses.
Even before Metro Pacific Hospital officially filed its listing plan with the SEC, KKR and other buyout firms such as Blackstone and CVC had expressed intent to take a stake in the hospital group. Singapore state investor Temasek Holdings was also reported to be among those interested in MPCI’s hospital unit.