New Delhi-based Fortis group is set to acquire stakes in Chennai-based Malar Hospitals Ltd.
The group, through International Hospital Ltd - a wholly owned subsidiary of Fortis Healthcare Ltd (FHL) - and Oscar Investments Ltd has entered into an agreement with the promoters of the Chennai-based Malar Hospitals to acquire 28 per cent of the holdings.
Fortis will also make an open public offer to acquire 20 per cent stake from the public. The deal will pave Fortis' entry into south India.
Announcing the deal with Malar Hospitals' promoters to the media here Thursday, Anil Panwar, president, governance and growth, FHL, said that the 180-bed hospital has a revenue potential of Rs.4 million per bed per year.
The group would invest between Rs 200 and Rs 250 million towards upgrading the facilities and making it into a specialist centre for cardiac care in the city.
"Our team will study the set up in Malar Hospitals and decide on the future course of action", said Daljit Singh, president, strategy and organisational development, FHL.
FHL is on the look out for further deals in Chennai, he added.
The parties mutually arrived at an enterprise value of Rs 570 million for Malar Hospitals.
As per the agreement, International Hospitals would acquire Malar Hospitals' promoter stake of 28 percent (3.9 million shares). Malar Hospitals has an equity capital base of Rs 13.9 million.
In addition, International Hospitals and Oscar Investments would lend Malar Hospitals Rs 10 million and Rs 4 million, respectively. Malar Hospitals would use the amount towards a one-time settlement of its institutional debts.
"The loan would be converted into equity at a later date. The converted equity will be around 25 per cent of the expanded capital base of Malar Hositals," said Panwar. The share of International Hospitals will be 18 per cent and that of Oscar Investments will be 7 per cent.
Post conversion of loan, Malar Hospitals' equity capital base will increase by Rs 5 million to Rs 18.9 million.
In addition, International Hospitals will make a public offer to purchase 20 per cent of the 70 per cent public holding at Rs 30 per share.
Depending on the response to the public offer, Fortis group through International Hospitals and Oscar Investments would control anything between 46 to 66 per cent of the stake in Malar Hospitals.
According to Jasbir Grewal, vice president, operations, FHL, there will not be any disturbance in the contracts that Malar Hospitals has already entered with consultants, laboratories and others.