Delhi-based hospital chain Fortis Healthcare has acquired 10 hospitals from the Wockhardt stable for Rs 909 crore.
The two hospitals in Mumbai, three in Kolkata five in Bengaluru have a combined capacity of
1,902 beds. Fortis will use Rs 350 crore from a proposed rights offer and debt to fund the acquisition, group chairman Malvinder Mohan Singh told TOI.
Both the parties have signed a business transfer and a non-compete agreement. The business transfer for 8 operating and 2 under-construction hospitals is expected to be completed by the end of December, said Fortis Healthcare MD Shivinder Singh, maintaining that 33% would immediately be added to EBIDTA numbers.
TOI was the first to report on the deal in its December 18, 2008 edition. It was reported that Fortis Healthcare was looking at a majority stake in the 18-year-old Wockhardt Hospitals. At that time, Manipal and Apollo Hospitals too were in the race. But by March 2009, both had dropped out due to ‘‘the high valuations being quoted by Wockhardt Hospitals'', sources said.
Touted as the largest deal in the healthcare sector till date, the acquisition will give Fortis, which has most of its hospitals in north Indian cities, a stronger foothold in Mumbai, Kolkata and Bengaluru. Wockhardt Hospitals CEO Vishal Bali, along with 12 other senior members of the Wockhardt Hospital management team, will soon shift to Fortis Healthcare.
Prior to the deal, the largest healthcare acquisition was of Escorts Heart Institute for Rs 650 crore, also by Fortis Healthcare in 2005. Fortis has a network of 28 hospitals, including 12 satellite and heart command centres.
Wockhardt chairman Habil Khorakiwala said the amount would be used to retire Rs 500 crore of Wockhardt Hospital's debt.
Talking about the transaction, Fortis MD Shivinder Singh said the deal would be EPS accretive from the first year onwards. He added that Fortis has a 2012 target of $1 billion in revenue, 40 hospitals and 6,000 beds. ‘‘We will keep adding to those figures, since we are near our target. The deal also ensures a strategic fit between both parties.''
Group chairman Malvinder Singh said the deal ‘‘brings together two leading brands to create a national healthcare delivery network.'' Religare Capital Markets were the advisors to Fortis Healthcare.
Incidentally, the deal with Fortis was necessitated due to the debt burden of Wockhardt group's flagship firm, Wockhardt. The pharma business of the company has been undergoing corporate debt restructuring to reschedule loans of about Rs 3,700 crore. The pharmaceutical company had registered huge losses on derivatives and high interest burden. The deal is expected to bail out Wockhardt from its current financial crisis.
It may be recalled that a Rs 3,000-crore initial public offering of Wockhardt Hospitals was in the works in February 2008. That attempt had failed due to uneasy market conditions. The company had also tried to enter into a transaction with US-based private equity major General Atlantic to invest around $140-150 million in the hospital chain. However, the ‘‘structure of the investment could not be worked out,'', officials said.