Wockhardt agrees to sell 10 hospitals to Fortis

25 Aug 2009, ET Bureau


MUMBAI/NEW DELHI: The Habil Khorakiwala-promoted Wockhardt Hospitals on Monday said it has agreed to sell 10 of its hospitals to Fortis Healthcare for Rs 909 crore, in one of the largest healthcare deals in the country. The deal also narrows the gap between two leading players and will help Wockhardt Hospitals reduce its debt burden.

The deal, which was first reported by ET on August 22, includes eight functioning hospitals of Wockhardt and makes Fortis, the second-largest healthcare provider in the country after Apollo Hospitals. It would also enable Wockhardt Hospitals to clear loans totalling Rs 500 crore that it had borrowed for expansion.

“We will use the funds to clear our debt and the remaining will be used for the 10 hospitals which we still have under our control,” said Wockhardt chairman Habil Khorakiwala. “We also plan to add five more hospitals to the network.” The deal also includes Rs 190 crore towards capital work-in-progress for two under-construction projects.

The healthcare deal will give Fortis additional 1,902 beds, increasing the Delhi-based company’s capacity to 5,180 beds across 38 hospitals. The acquisition is considered vital for Fortis, as it gives the company a pan-India presence which is beneficial in the large, diversified healthcare market in India.

Monday’s acquisition is the latest in Fortis’ inorganic expansion spree that commenced in 2005, when it bought Delhi-based Escorts Hospitals for Rs 585 crore, and followed it up two years later by acquiring Chennai’s Malar Hospitals for Rs 34 crore.

“We have signed the business transfer agreement, but it will take a few months for us to finish the formalities,” said Fortis Healthcare managing director Shivinder Singh. “We expect to execute the deal by December,” he added. Fortis would fund the acquisition through a mixture of equity and debt — of which Rs 350 crore would come from the company’s proposed rights issue. Fortis is awaiting Sebi approval for its Rs 1,000-crore rights issue.

The deal between Habil Khorakiwala — whose family owns 93% in Wockhardt Hospitals — comes more than a year after the firm dropped a public issue plan due to adverse market conditions. Monday’s deal was lower as per the 2008 IPO price band of Rs 280-310 per share, that would have valued Wockhardt Hospitals between Rs 2,900 crore and Rs 3,232 crore.

The hospitals being divested under the deal are spread across three metros (2 in Mumbai, 5 in Bengaluru and 3 in Kolkata). They comprise 85% of the company’s revenue and more than 70% of the total number of beds. The Mumbai-based hospital chain is now left with approximately 650 beds in its remaining facilities. Fortis will also get three nursing colleges — two in Bengaluru and one in Mumbai.