Global private equity firm Blackstone is set to acquire a controlling stake in Care Hospitals from TPG, valuing the India and Bangladesh-based hospital chain at around $800 million. The deal will be Blackstone’s first foray into India’s healthcare sector. Max Healthcare Institute, meanwhile, is currently contesting the acquisition in court, claiming that TPG violated an exclusivity agreement when it sold the hospitals.
Global private equity firm Blackstone has signed a binding agreement to acquire a controlling stake in Care Hospitals from TPG, valuing the India and Bangladesh-based hospital chain at about $800 million, according to people with knowledge of the matter. The PE firm will pick up a stake of about 70% under the pact, they said.
The deal will mark Blackstone’s first healthcare investment in India, with TPG staying on as a minority shareholder, holding about 30%. Interestingly, the sale itself is being contested in court by Max Healthcare Institute, which claims TPG violated the terms of an exclusivity agreement between them on a transaction. Despite this, the deal was completed between the two private equity behemoths.
Care Hospitals is a leading healthcare provider in India, with over 2,500 beds across 17 hospitals in nine cities. The hospital chain provides a range of healthcare services, including cardiology, neurology, oncology, and gastroenterology, among others. The acquisition by Blackstone will provide the hospital chain with additional resources to expand its reach and services.
The deal is significant for Blackstone as it marks the firm’s entry into the Indian healthcare sector. The acquisition is also expected to provide the firm with access to a growing market in India as the country’s healthcare sector continues to expand. According to a report by the World Health Organization, India’s healthcare sector is expected to grow at a CAGR of 22% to reach $280 billion by 2020.
Max Healthcare Institute, which claims TPG violated the terms of an exclusivity agreement between them on a deal, is contesting the sale of Care Hospitals to Blackstone in court. Max Healthcare claims that TPG had entered into talks with it for the sale of Care Hospitals and that the sale to Blackstone breaches the exclusivity agreement between the two parties.
The Bombay High Court has appointed a retired justice as the sole arbitrator in the dispute between Max Healthcare and Care Hospitals and TPG-owned entities to decide upon all disputes between the parties. The arbitrator will have to decide on the interim relief within the next 15 days. However, Blackstone believes that the outcome of the arbitration is unlikely to have a major bearing on the transaction, and that is the primary reason why it has agreed to sign the deal, said a person close to the development.
The transaction is said to have taken place at a lower valuation than what was initially sought. Blackstone had emerged as the highest bidder in the initial sale process, but talks had broken down over valuation mismatches, following which TPG entered into talks with Max. As per the terms of the agreement, Max made a non-binding offer to TPG within the stipulated six-week window for a buyout. But the Max offer was a structured agreement with an option on the Bangladesh assets after two years—it wanted to run the operations in that country for two years before making an offer to buy them.
The acquisition of Care Hospitals by Blackstone is expected to be a significant boost for the Indian healthcare sector, providing additional resources to a growing market. However, the ongoing legal dispute between Max Healthcare and TPG-owned entities may impact the acquisition. The parties to the deal will be closely monitoring the arbitration’s results.