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SINGAPORE, April 11 (Reuters Breakingviews) – Temasek is picking a good time to focus on health. The sovereign investor is taking control of Indian hospital operator Manipal for $2 billion. Growing fast and recession-resilient, Asian healthcare is emerging as a relatively attractive safe haven for financial buyers.
It’s a bold push for the Singaporean firm into India, where its exposure has nearly doubled in five years to $16 billion. Manipal operates 29 hospitals and has more than 8,300 beds, making it among the largest chains in a sector led by Apollo Hospitals Enterprise (APLH.NS). It will become Temasek’s biggest current investment in an Indian company too, but the purchase is prudent.
For a start, Temasek will now be able to call the shots and realise more savings in an asset it has part-owned since 2017. It’s buying a further 41% to bump its stake up to 59%. U.S. private equity firm TPG will benefit. It will hold 11% after exiting its investment through one fund and buying again through another.
Deals allowing investors to take control are on the rise but remain a prize in fast-growing tycoon-heavy economies. Manipal Chairman Ranjan Pai cites its long and cordial relationship with Temasek as one factor behind the family relinquishing majority control in a business that needs “long-term patient capital.”
Such capital is aiding hospital operators to expand aggressively as incomes rise and insurance penetration deepens. The pandemic focused minds on the importance of healthcare services too. Helped by acquisitions, for example, Manipal more than doubled its revenue to a provisional $489 million in the year to March 2022 and its EBITDA margin topped 24%, India Ratings & Research said in a note published in August.
Others are on an Indian health drive too. Malaysia’s IHH Healthcare (IHHH.KL) is trying to increase its stake in Fortis Healthcare (FOHE.NS). Blackstone (BX.N) is the sole bidder for Care Hospitals, a potential $1 billion buyout, per Economic Times. Elsewhere, Metro Pacific Hospital, the market leader in the Philippines, has been growing fast too since KKR (KKR.N) and Singapore sovereign fund GIC purchased it in 2019.
Temasek’s deal might value Manipal at some 40 times its EBITDA, based on India Ratings’ report of its performance in the first three months, but its earlier stake purchase would reduce the multiple it is paying closer to Apollo’s 29 times. Either way, at this point in the cycle, hospitals look a healthy bet.
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CONTEXT NEWS
Singapore’s Temasek will buy an additional 41% stake in Manipal Health Enterprises, the unlisted Indian hospital chain said on April 10. The state investor will spend around $2 billion according to a person familiar with the situation, adding to an existing 18% stake held by one of its wholly owned subsidiaries.
After the deal closes, the Pai family’s Manipal Group will hold about 30% of Manipal Health. TPG, which first invested in the company in 2015, will exit, and acquire a fresh interest of 11% through its new Asia fund.
Editing by Una Galani and Katrina Hamlin
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
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