The promoters of leading hospital chain Medanta have agreed to sell the business to Manipal Hospitals for Rs 5,800 crore, said two people aware of the development, ending negotiations that have lasted two years. Besides the promoters, existing investors Carlyle and Singapore-based Temasek also agreed on the price and will exit the hospital chain, they said.
Medanta’s promoters — renowned cardiac surgeon Naresh Trehan, his family members and cofounder Sunil Sachdeva, who jointly own 55% of the company — will sell their entire stake to Manipal. Medanta, founded in 2009, operates super speciality hospitals and clinics in cities such as Gurgaon, Lucknow, Indore, Ranchi and Sri Ganganagar.
The Medanta board approved the offer on Friday. Manipal has begun confirmatory due diligence on Medanta assets, said one of the persons cited above. While the documentation work has begun, an agreement is likely to be signed in next 60 days, he added. TPG and Temasek-backed Manipal Hospitals, one of India’s largest hospital chains, had submitted a binding offer of Rs 5,800 crore to acquire Medanta, ET reported on April 29. The management was evaluating the offer and a decision was likely soon, i ..
Medanta’s existing investor Carlyle will decide on the offer in a week and the Medanta board will meet in the next two weeks on the matter, said the ET report.
US-based PE fund Carlyle holds a 27% stake in Medanta, acquired from US-based Avenue Capital in 2013 at a valuation of $600 million (Rs 3,540 crore in 2013). Singapore’s investment company Temasek owns 18% of both Medanta and Manipal.
Though most of the financing will be done by Ranjan Pai through equity and internal accruals, existing investors TPG and Temasek will also participate in this acquisition, said one of the persons.
Pai owns 60% of Manipal Hospitals through the promoter holding company, with TPG and Temasek holding the rest. TPG had already invested about $146 million in February 2015 in Manipal Education & Medical Group (MEMG) and has a 22% stake in the entity.
Medanta had posted ebitda (earnings before interest, taxes, depreciation, and amortisation) of Rs 240 crore in FY19, up 8% from FY18. The Rs 5,800 crore valuation will be an ebitda multiple of about 24 times.
Manipal, TPG, Temasek, Carlyle and Naresh Trehan didn’t respond to queries. TPG and Temasek spokespersons declined to comment.
PE firm Blackstone held discussions with Pai with a Rs 3,200 crore ($450 million) funding commitment for a Medanta buyout. The world’s largest private equity firm is capitalising the Pai family’s privately held, wholly owned umbrella entity MEMG, ET reported on February 18.
Manipal owns 10 multi-speciality hospitals, five teaching hospitals and several fertility clinics and is looking for a strong base in the north where Medanta’s footprint is largely focussed.
In the past few years, the hospital industry has seen a shakeout following government regulations such as price controls, which have reduced margins. Tapping the buyout opportunity, top players and investors have been in discussions to buy mid-sized and smaller hospital chains in India.
IHH Healthcare, the largest hospital chain in Asia, acquired Fortis Healthcare for $1.1 billion last year, the biggest deal in the Indian hospital sector. This is the third buyout by IHH in India since 2015. The last two acquisitions by it include Hyderabad-based, 750-bed super speciality Continental Hospitals (Rs 310 crore) and Global Hospitals (Rs 1,284 crore).