The promoters of Fortis Healthcare Ltd. is understood to have reached a pact with Wockhardt's founder Habil Khorakiwala to acquire up to 74% stake in the unlisted Wockhardt Hospitals for a consideration of Rs.750 crore, valuing the enterprise at over Rs.1,000 crore, the Economic Times reported quoting a statement from people familiar with the development.
It is reported that private equity firms, such as General Atlantic and Advent were also in the race, but Fortis is emerging as the front-runner in clinching the deal.
In the event of the deal materializing, Fortis is likely to invest Rs.400 crore in the first phase for a 40% shareholding, and plans to increase its stake, according to investment bankers. But a formal deal is yet to be sealed, as both parties are in the process of ironing out differences, including those over branding the hospital chain.
Wockhardt spokesperson refused to comment on the matter, while a Fortis Healthcare spokesperson said the company could not comment on the market speculation or any individual deals.
Bankers were quoted to have said that Fortis' promoters and Khorakiwala had reached an agreement almost ten days back. Another banker said Fortis valued the hospital chain at over Rs 1,000 crore, which is substantially lower than the proposed IPO valuation, arrived at almost 15 months ago.
In February 2008, Wockhardt had sought to divest 24% for Rs.800 crore and the issue had to be withdrawn because of a lack of demand.
Fortis currently manages 3,000 beds with a network of 26 hospitals, which it plans to increase to 40 by 2012. It will add 1,200 beds soon at new facilities in Vashi in Navi Mumbai, Shalimar Bagh in Delhi and Gurgaon.
Wockhardt Hospitals is a 100% subsidiary of pharmaceutical company Wockhardt. It runs 17 facilities and is planning to open facilities at Kolkata, Mumbai and Nashik, which will start functioning within a month. If the deal materializes, Fortis will obtain easy entry into Maharashtra, Bangalore and Kolkata. The deal will take its network strength to 43.
Fortis Healthcare is in the process of raising Rs.1,000 crore through a rights issue. The company had said the money would be utilized to fund its Greenfield projects and restructure the balance sheet, besides being used for other investments. Additionally, the company plans to raise money through issue of warrants, but the details are yet to be decided.
In January this year, it had bought a controlling stake in Mauritius-based hospital, Clinique Darne, in a joint venture with Mauritian industrial group CIEL that operates in agro-industry, textiles and equity investment.
An analyst said, A staggered deal could be a way out. He argued that selling some pharma assets and a strategic dilution in the hospital business was critical to Wockhardt's fiscal restructuring plans.
Industry analysts feel rising incomes and a demand for quality healthcare and the absence of an efficient government-run health delivery system are fuelling growth of hospital chains in India. The sector grows at an estimated 10% to 15% a year.
At the BSE, Fortis Healthcare shares are currently trading at Rs.67.90, up by Re.1.90 or 2.88% on a volume of 2.91 lakh shares. The company's scrip touched an intraday high of Rs.73.00 and intraday low of Rs.67.40.
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