Fortis Healthcare on Friday sealed a deal with Wockhardt Hospital to buy out the entire stake of the promoters for Rs 1,000 crore, according to senior company sources. The move has finally brought to an end months of speculation on the stake sale in Wockhardt Hospital by its founder Habil Khorakhiwala.
Sources said the Singh brothers — Malvinder and Shivinder — promoters of Fortis Healthcare, were present at the Wockhardt House — the corporate office of the Wockhardt group at the Bandra Kurla complex in Mumbai, on Friday, to sign the deal papers. The meeting between the key management members of Wockhardt and Fortis lasted for about four hours, the sources said.
While the deal between the two companies seems to have taken its final shape, Wockhardt officials refused to comment on media queries. However, sources pointed out that the company’s chairman Khorakhiwala will be sending out a formal note to all employees on the stake sale on Saturday morning. In fact, employees at Wockhardt Hospital at Bannergatta in Bangalore are aware of the development, sources said.
Fortis had been trying to buy Wockhardt Hospital for the last one year in view of the expansion opportunities the move would throw up. The Singh brothers, who had raised about Rs 10,000 crore by selling their stake in Ranbaxy Laboratories Ltd to Daiichi Sankyo Ltd of Japan, had been looking for an avenue to deploy these funds.
Wockhardt Hospital is a perfect strategic fit for the Singh brothers’ business as it would immediately give Fortis access to the southern and western markets of the country. Moreover, for the brothers, the price of Rs 1,000 crore is easily affordable.
Wockhardt Hospital has so far not been a feather in the cap of the Wockhardt group. Early last year, Khorakhiwala had tried to float an initial public offering (IPO) of Wockhardt Hospital to raise Rs 3,000- 3,500 crore but failed. Later the management tried to sell the stock at an inflated price to General Atlantic but met with no success. According to the sources, Fortis was the only hope for Wockhardt.
Going forward, there is a strong likelihood of a rejig of the company’s senior management cadre. There will not be any layoffs among the hospital’s medical fraternity but there is a strong possibility of some downsizing of the marketing staff. The sources also said Fortis will make a slew of fresh investments to strengthen the diagnostics division of Wockhardt Hospital.
Last November, Khorakiwala had said the company was planning to sell stake in the hospital chain to raise around Rs 1,000 crore for future expansions.
Besides Fortis, Manipal Group and Apollo Hospitals were also interested in picking up stake in Wockhardt. An ICICI Securities report on Wockhardt pointed out that the group had made some large acquisitions in the European and US markets through debt funding. While the cost of the acquisitions itself was not too high, the company had overstretched on funding. Of the total $ 735mn debt (of which $ 700mn is in foreign currency), $ 140mn is in the form of foreign currency convertible bonds (FCCBs), the repayment is which is due in October 2009. It will not be easy for the company to raise funds at reasonable terms to meet its repayment obligations due to the current global economic slump, the report said.