After almost a year of discussions, Life Healthcare, South Africa’s third largest hospital group is exiting its Indian business. The company will sell its stake in Max Healthcare to global investment firm Kohlberg Kravis Roberts (KKR) for 4.3 billion rand.
Life Healthcare, which took a 26 percent stake in Max Healthcare, one of India’s biggest private hospital chains, increased its shareholding to 49.7 percent in two further transactions. It eventually invested 2.3 billion rand in the joint venture.
Although India’s public health system is underfunded and patients prefer private health care, Life Healthcare failed to get the returns investors desired. Shrey Viranna, Life Healthcare’s CEO said exiting the Indian business will enable the company focus on its core business operations in South Africa, the United Kingdom, Poland and Western Europe.
He said “this is not in anyway to detract from Max Healthcare as a group or India as a long term market. For other investors it is still an exciting environment to be in”. Viranna added that “in the last year, we have taken the view that our long term growth will be building a more integrated portfolio in South Africa, expanding from acute care into complementary care and diagnostics, and focusing more on investments we have made in diagnostics and imaging in Europe”.
According to Life Healthcare’s 2017 annual report, it has invested 2.2 billion rand in the Polish hospital chain Scanmed and 13.9 billion rand in the United Kingdom based diagnostic group, Alliance Medical. KKR is to pay 80 rupees per share for Life Healthcare’s 266,997,937 shares in Max Healthcare. The final value of the transaction will be determined by the exchange rate when the deal is finalised.
The transaction which will be subjected to regulatory approval, is expected to be finalised before the end of 2018. Jean-Pierre Verster, Fairtree Capital portfolio manager said the price Life Healthcare received for its share in Max Healthcare was in line with its expectations, which ranged from 3 billion to 5 billion rand.
Viranna said Life Healthcare will use the funds to settle debt and consider other investments in the future.