India's Fortis to buy stake in Parkway hospitals
Shares of Indian hospitals company Fortis Healthcare touched an all-time high Friday, after the company said it is buying nearly a quarter of regional hospital operator Parkway from private equity firm TPG Capital for $685 million.
The deal gives Fortis Healthcare Ltd. a strong regional presence and vaults it past Apollo Hospitals to become India's largest hospital operator, with stakes in 62 hospitals and over 10,000 beds across Singapore, Malaysia, Brunei, India, China and the United Arab Emirates.
"Improving the reputation of Fortis as a major player in healthcare — that would be the key motive behind this acquisition," said Bino Pathiparampil, an analyst at Mumbai's IIFL Capital. "Acquiring a Parkway overnight makes Fortis a well-known name across the region."
Pathiparampil said the 30 percent to 40 percent premium Fortis paid for its stake was justifiable given the strategic benefits of the deal, which could help Fortis improve the quality of its services and profit from scale.
Parkway chief executive Lim Cheok Peng welcomed Fortis and said he looked forward to working together.
Shares rose 5 percent to an all-time high of 187.5 rupees ($4.13) before sliding to close at 181.3 rupees on the Bombay Stock Exchange in an otherwise flat market Friday.
Fortis will get seats on Parkway's board and hopes to install Fortis chairman Malvinder Mohan Singh as chairman of Parkway's board of directors, according to a company statement released in New Delhi.
"This acquisition will significantly expand our footprint across the region and place us strategically for geographical and clinical leadership in Asia, a big step closer to our vision of establishing a global healthcare delivery network," Singh said in the statement.
Singh and his brother, Fortis managing director Shivinder Mohan Singh, have been flush with cash since 2008, when they sold their stakes in Ranbaxy Laboratories Ltd., India's largest pharmaceutical company, to Japan's Daiichi Sankyo Co., which paid $4 billion for a majority stake.
They've been pouring that money into expanding other family businesses, chiefly Fortis and Religare Enterprises Ltd, a financial services group.
In December, Fortis paid $200 million for 10 hospitals run by India's Wockhardt Hospitals Ltd.
Last month, Religare Enterprises acquired a 65 percent stake in Northgate Capital LLC, a U.S. private equity company, for $200 million.
Cross-border deals have picked up as Indian companies, flush with cash and optimism from the rebounding national economy, set their sights overseas.
In February, 13 Indian companies acquired assets abroad, worth $616 million, up from six deals worth $136 million in February 2009 and 12 deals worth $243 million in February 2008, according to Grant Thornton.
In February, Bharti Airtel, India's largest telecom company, bid $10.7 billion for the Africa assets of Kuwait's Zain. If closed, the acquisition would transform Bharti, which already has 125 million subscribers in India's increasingly crowded telecoms market, into an emerging market powerhouse.
India's rising global ambition doesn't always pay off, however.
Reliance Industries, India's most valuable company, recently lost a $14.5 billion bid for bankrupt Dutch chemical company LyondellBasell Industries, which would have been the largest overseas acquisition in Indian corporate history.
Jaguar Land Rover has been weighing on India's Tata Motors since it bought the struggling luxury brands from Ford Motor Co. in June 2008 for $2.3 billion.
But Tata Motors seems to be emerging from the shadow of that acquisition, which saddled it with debt that proved difficult to refinance.
Jaguar Land Rover, which accounts for just over half of Tata Motors sales, swung to profitability in the December quarter and on Friday ratings agency Crisil upgraded the company's short-term debt to A+.
Crisil said the upgrade was due to both improving performance and an expected 12 billion rupee ($264 million) cash infusion from selling off shares in other holdings.