Fortis Healthcare to divest Fortis Malar Hospital to MGM Healthcare for Rs 128 crore
Fortis Healthcare to divest Fortis Malar Hospital to MGM Healthcare for Rs 128 crore
Fortis Healthcare Limited’s recent announcement of the sale of Fortis Malar Hospital in Chennai to MGM Healthcare Private Limited marks a significant strategic move for the integrated healthcare delivery service provider. The decision to divest this particular healthcare facility suggests a broader initiative by Fortis Healthcare to optimize its portfolio and concentrate on core operations. The sale consideration of approximately Rs 128 crore, subject to customary closing adjustments, reflects the evaluated worth of Fortis Malar Hospital, including its business operations and the associated land and building assets situated in Gandhi Nagar, Adyar.
This transaction involves the transfer of both operational control and physical infrastructure, indicating that MGM Healthcare Private Limited will not only take over the management of patient care services and medical staff but also assume ownership of the hospital’s real estate. The choice of this strategic move may be influenced by factors such as the hospital’s location, market dynamics in Chennai, and the company’s broader business strategy.
As with any such transaction in the healthcare sector, regulatory approvals are likely necessary to ensure compliance with industry standards and regulations. Fortis Healthcare’s decision to divest Fortis Malar Hospital underscores the dynamic nature of the healthcare industry, where companies periodically reassess their assets and operations to adapt to changing market conditions and focus on sustained growth.
The announced transaction involving the sale of Fortis Malar Hospital to MGM Healthcare Private Limited is slated to be an all-cash deal, with the completion expected by the end of January 2024. This timeline is, however, contingent on meeting specific conditions precedent and closing conditions as outlined in the definitive agreements. Crucially, the consummation is also subject to approvals from the shareholders of both Fortis Healthcare and Fortis Malar Hospitals Limited.
In a press statement, Fortis Healthcare highlighted that the divestment aligns with its ongoing portfolio rationalization strategy. The company aims to concentrate its resources and efforts on bolstering its presence in select geographic clusters where it has a substantial footprint. This strategic realignment reflects a broader commitment to optimizing its portfolio for sustained growth.
Fortis Malar Hospital, with its approximately 140-bed facility, has faced certain legacy issues. Dr. Ashutosh Raghuvanshi, Managing Director & CEO of Fortis Healthcare, emphasized that the proposed divestment of Fortis Malar is a deliberate move to enhance the overall profitability and margins of the hospital segment. He stated that this decision, marking the second underperforming asset divestment in the last two quarters, underscores Fortis Healthcare’s dedication to judiciously reallocating capital and prioritizing growth and expansion in key markets. The divestment strategy reflects a proactive approach to address specific challenges and position the company for long-term success in the evolving healthcare landscape.
The transaction involves the divestment of business operations associated with Fortis Malar Hospital, a facility held in the listed subsidiary of Fortis Healthcare, namely Fortis Malar Hospitals Limited. Fortis Healthcare holds a substantial 62.7 percent equity stake in this subsidiary. The scope of the divestment includes the business operations of Fortis Malar Hospital, encompassing its Outpatient Department (OPD) and radiology services. Additionally, the deal includes the land and building on which Fortis Malar Hospital is situated, along with multiple adjacent land parcels.
MGM Healthcare Private Limited, the acquiring entity, is recognized as one of the rapidly expanding providers of quaternary care in South India. Currently operating two quaternary care hospitals with a combined bed capacity of 600, MGM Healthcare also has a greenfield hospital under development in the Tamil Nadu, Pondicherry region.
This strategic move by Fortis Healthcare aligns with its broader portfolio optimization strategy, focusing on streamlining assets and operations to enhance overall efficiency and profitability. The decision to divest a majority stake in Fortis Malar Hospitals Limited underscores the company’s commitment to prioritizing growth and expansion in key markets.
The financial context provides additional insight, with Fortis Healthcare reporting a 15.7 percent year-on-year fall in net profit for the July-September quarter. Despite this, the hospital operator saw a 10 percent year-on-year rise in revenue, reflecting a dynamic financial landscape in the healthcare sector. This transaction represents a deliberate effort by Fortis Healthcare to strategically position itself for future growth amidst evolving market conditions.
