MUMBAI Fortis Healthcare Ltd said on Monday it will pay 9.09 billion rupees ($187 million) to buy 10 hospitals from Wockhardt Hospitals Ltd, which failed in its efforts to go public last year.
The acquisition will add 1,902 beds to New Delhi-based Fortis' network, taking its capacity to 5,180 across 38 hospitals, and expands its presence in western, southern and eastern India.
"This acquisition allows Fortis Healthcare to have a national presence ... it significantly strengthens and enlarges the critical infrastructure and our understanding of patients along the country," Malvinder Singh, the chairman of Fortis Healthcare, said at a press briefing.
India's largest hospital chain, Apollo Hospitals Enterprise Ltd, was also looking to buy hospitals from Wockhardt Hospitals Ltd but dropped those plans in June, citing differences over valuation.
Shares of both Fortis and Wockhardt Ltd rallied on Monday, with Fortis shares closing up 6.6 percent at 116.05 rupees, while Wockhardt ended up 8.9 percent at 176.80 rupees in a Mumbai market that closed up 2.55 percent.
Monday's deal, set to be completed in December, includes 8 operational hospitals in Mumbai, Bangalore and Kolkata, and two that are under construction, along with 2,700 total staff, Vishal Bali, chief executive of Wockhardt Hospitals said.
Bali, along with 12 other senior members of the Wockhardt Hospital management would be shifting to Fortis, Bali added.
Earlier this month, Fortis approved a rights issue to raise 9.97 billion rupees, much of it slated to fund expansion.
Wockhardt Hospitals, controlled by the founders of Wockhardt Ltd, has been trying to raise money since its initial public offer (IPO) was withdrawn last year on poor investor response.
"We are happy about the whole situation because we had tried for an IPO a year back and this financial meltdown happened," Wockhardt chairman Habil Khorakiwala told reporters.
"We have been looking at various alternatives," he said.
After the deal, Wockhardt Hospitals will continue to own 10 other hospitals and plans to add five more hospitals including a 350-bed unit in south Mumbai, Khorakiwala told reporters.
The money from the sale will primarily go towards retiring debt of about 5 billion rupees and the rest will be invested back in the running of business and the expansion, he said.
"What we are trying to do is retain our existing hospitals and also... increase what we have," he said, adding the firm was on track to add a hospital in south Mumbai in 12 to 15 months.
Sister firm Wockhardt Ltd is in the midst of restructuring its businesses and selling non-core units as it seeks to raise funds to pay down some of its debt.
Religare Capital Markets advised Fortis Healthcare on the deal, while IL&FS Financial Services Ltd was the exclusive financial advisor to Wockhardt Hospitals.
(Additional reporting by Aniruddha Basu)
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