Private equity giant KKR, which has previously backed the promoters of Apollo Hospitals and diagnostics chain Metropolis Healthcare, is making its biggest bet in the healthcare services space.
KKR is set to own a majority stake in Max Healthcare after merging its portfolio firm Radiant Life Care Pvt. Ltd with the hospital chain, as per a stock-exchange announcement on Monday.
The multi-tiered deal involves KKR-backed Radiant merging its healthcare assets into Max Healthcare as Analjit Singh-promoted Max India parts with its majority stake in the joint venture. Radiant had, in September, agreed to buy a 49.7% stake in Max Healthcare from South Africa-based hospital operator Life Healthcare.
Max Healthcare will then be reverse merged with Max India to create a hospital firm with an equity valuation of around Rs 7,242 crore ($1 billion) and a combined strength of 3,200 beds across 16 hospitals. It would be among the five public listed healthcare services firms with valuation of $1 billion or more besides Apollo Hospitals, Dr Lal Pathlabs, Aster DM Healthcare and Fortis Healthcare.
This would also result in KKR and Radiant promoter Abhay Soi together acquiring a majority stake in Max Healthcare.
In the final entity, KKR will have majority stake with 51.9% stake and Soi will have 23% stake. Analjit Singh will be classified as a non-promoter after he sells 4.99% stake to KKR in the merged entity. His eventual shareholding will be 7%.
Under the proposed deal, Max India will demerge its non-healthcare businesses –comprising of Max Bupa and Antara Senior Living — into a new wholly-owned subsidiary of Max India whose shares will be listed separately on both BSE Ltd and National Stock Exchange of India Ltd, as per the announcement.
Shareholders of Max India will receive one share each of the new company for every five shares that they hold in the existing company.
Meanwhile, the new Max Healthcare will become the largest hospital network in north India, among the top three hospital networks in India by revenue and the fourth-largest in India in terms of operational beds.
“Radiant has achieved significant growth and expansion during a time of rapid industry consolidation, and the proposed acquisition of a majority stake in Max Healthcare marks an exciting step forward in our strategy to increase scale by merging with a leading and complementary hospital network,” said Soi.
The merged entity will operate tertiary and quaternary care facilities offering high-end critical and super speciality care supported by strong local brands such as BLK Hospital, Max Saket Hospital, Max Smart Hospital, Max Patparganj Hospital, and Nanavati Hospital.
Avendus Capital advised Radiant Lifecare and KKR on the transaction.