Max Healthcare looks for strategic alliance

Max Healthcare is likely to enter into an equity-cum-strategic alliance with a private equity (PE) firm-backed global hospital major. Max Healthcare is the 1,100-bed hospital subsidiary of Max India Group. Max India is the flagship company of Analjit Singh, which owns majority stake in life and health insurance ventures, besides the hospital chain. The company is in discussions with two global PE funds that have significant stake in two separate large hospital chains and is likely to conclude the deal with one of them shortly. The company’s business turned profitable in the last quarter of FY11 with its earnings before interest, taxes, depreciation, and amortisation, or Ebitda, more than doubling to 52 crore. As a precursor to the proposed transaction, Max India decided to buy out 16.37 percent stake in Max Healthcare from private equity major Warburg Pincus last week to consolidate its holding in Max Healthcare to 91 percent. Under the proposed transaction, the potential strategic investors will pick up a significant minority stake, which will be over 26 percent in Max Healthcare, said another person familiar with development. Besides Max India’s 91 percent stake, Washington-based International Finance Corporation owns 3.1 percent stake in the healthcare company, while the remaining 6 percent is owned by overseas corporate bodies. The proposed transaction is likely to be at an equity value of around 1,500 crore for Max Healthcare, which is a significant premium to the exit price that Warburg Pincus charged from Max India. Warburg had sold 16.37 percent stake for 140 crore, which puts an equity value to Max Healthcare at 855 crore. Max Healthcare network of hospitals registered revenue of 685 crore in 2010-11, a growth of 28 percent over the previous year.

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