Temasek backs bid for Medanta Hospitals with $300 Million

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Temasek is backing Manipal Hospitals’ bid to acquire Naresh Trehan-promoted Medanta Hospitals with an additional cheque of close to Rs 2,100 crore (about $296 million at current exchange rate), two persons familiar with the development told.

Manipal is looking to acquire Medanta for Rs 5,500-6,000 crore in negotiations that have been running for over nine months, even as a potential deal now reaches its final stages. Manipal Health, which will manage over 3,500 beds, will be valued at close to $2 billion if the transaction closes, said one of the sources mentioned earlier. 

Temasek is already a shareholder in both Medanta and Manipal, owning 18% stake in both the companies and has also been playing the role of a mediator. While Manipal was in talks with alternative assets major Blackstone for structured financing of Rs 3,500 crore earlier this year, Temasek has stepped up in the last few months. ICICI BankNSE 2.38 % is doing the asset financing for the deal. 

“Temasek has been in discussions with Manipal for three-four months to increase its stake in the combined entity and is now financing it since they were already involved in the deal,” said an investment banker familiar with the discussions. 

If the deal goes through, Temasek is expected to roll over its shares in Medanta for additional shares in Manipal. Temasek, which has invested close to $10 billion in India, will hold 30-35% stake in Manipal after conversion of all its shares, while Pai is expected to hold 44-45% stake. It is not clear if TPG Capital, which currently owns a 22% stake in Manipal, will participate in the round. 

Another Medanta investor Carlyle, which owns 27%, is expected to cash out completely, while Trehan along with his co-founder Sunil Sachdeva, who own 55% in the company, are likely to get a mix of cash and stock. “The parties are still discussing the transaction and have to come to an agreement on certain conditions, including the valuation,” said the second source mentioned earlier. KKR-backed Radiant Life Care, which also acquired 50% in Max Hospitals, had also entered the fray to acquire Medanta.

If the deal closes, it will give Manipal a significant presence in North India where it is already building greenfield hospitals in Delhi and Jaipur. The company, which has over 2,000 beds across 11 hospitals, had also bid for Fortis Healthcare. But the deal went to Malaysia’s IHH. It had revenues of Rs 1,569 crore, up 12%, with losses doubling to Rs 82 crore for the financial year ending March 2018, according to India Ratings & Research. 

Medanta owner Global Hospitals reported a 3.5% increase in revenues to Rs 1,392 crore during the year ending March 2018, while profit after tax fell to Rs 33 crore from Rs 51 crore, according to a credit analysis by rating agency Crisil. 

Medanta has 1,250 beds in its facility in Gurugram and also manages facilities with about another 300 beds in Indore and Ranchi. It is also setting up new hospitals in Patna, Lucknow and Noida under the Medanta brand as it looks to double its bed capacity in the next three years.