August 1, 2019 / 10:56 AM / 25 days ago

Philippines' Metro Pacific's hospital stake draws over a dozen potential buyers

MANILA/SINGAPORE (Reuters) - Metro Pacific Investments Corp (MPI.PS) has received interest from many potential buyers for a minority stake in its hospital unit, which could be valued at up to $2.5 billion in the largest healthcare deal in the Philippines.

Appetite for dealmaking in the Asian healthcare sector has picked up with investors betting on an industry boom, driven by strong healthcare spending, especially in emerging markets.

More than a dozen foreign and Philippine firms have shown interest in submitting first-round, non-binding bids for Metro Pacific Hospital this month, David Nicol, CFO of its holding company, told Reuters on Thursday.

Metro Pacific Investments plans to sell a 40% stake in the hospital unit at a valuation of $2-$2.5 billion, its chairman Manuel Pangilinan said. That would mark the biggest ever healthcare deal in the country, Refinitiv data shows.

The holding company currently owns 85.6% of Metro Pacific Hospital. Singapore sovereign wealth fund GIC [GIC.UL] owns the rest of the unit, which operates 14 hospitals, many of which are among the Philippines’ largest and most modern.

“We want ... to remain the single largest shareholder. There’s much potential in hospitals,” Pangilinan said.

Metro Pacific Investments, which has interests in power and water utilities, toll roads and railways, is a unit of Hong Kong’s First Pacific Co Ltd (0142.HK) that is owned by Indonesian tycoon Anthoni Salim.

Sources familiar with the matter said potential bidders for the Philippine firm included Southeast Asian hospital groups, large Asian conglomerates, private equity and local firms.

“There’s interest from all over the world including our backyard,” Nicol said on Thursday after Metro Pacific unveiled results.

Earlier this year, sources told Reuters that private-equity firms and conglomerates were keen to snap up Columbia Pacific Management’s Asian hospital business, in a sale the U.S. investment company expected to fetch about $2 billion.

But analysts say lofty valuations pose a challenge to sale processes.

Since Metro Pacific’s hospital unit owns real estate, the Philippine’s 40% cap on foreign ownership will apply.

Robert Ramos, senior vice-president at Eastwest Bank in Manila, said valuations of Metro Pacific Hospital were hefty but could be justified by its dominant market share.

“As our population becomes richer and becomes capable of paying for these higher value services, you also have more customers,” Ramos said.

The hospital group targets to operate a network of 5,000 beds in the next few years from the current 3,200 beds by acquiring smaller hospitals.

Reporting by Neil Jerome Morales and Anshuman Daga; Editing by Muralikumar Anantharaman and Himani Sarkar

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