Fortis Healthcare to Divest Malar Facility to MGM Healthcare for INR 128 Cr

The divestment decision is part of Fortis Healthcare's strategy to optimise its portfolio, concentrating on key geographic clusters with a strong presence. This follows the earlier divestment of Fortis Healthcare's Vadapalani facility in Chennai.

Fortis Healthcare has finalised agreements for the sale of its Fortis Malar Hospital in Chennai to MGM Healthcare. This deal includes the sale of its Malar facility’s business operations, land and building assets. The deal, valued at approximately INR 128 Cr, will see the transfer of these assets to MGM Healthcare in an all-cash transaction.

The consummation of the transaction is expected by the end of January 2024, subject to various conditions and regulatory approvals.

The transaction encompasses the divestment of business operations of Fortis Malar Hospital, which is housed in Fortis Malar Hospitals Limited, a listed subsidiary of Fortis Healthcare, where Fortis Healthcare holds a 62.7% equity stake.

Additionally, it includes the outpatient department (OPD) and radiology business operations of Fortis Malar Hospital, along with the associated land and building assets, all located in Fortis Health Management Limited (FHML).

Furthermore, an adjacent land parcel, currently utilised as a parking premise, owned by Hospitalia Eastern Private Limited (HEPL), another wholly-owned subsidiary of Fortis Healthcare, is part of the divestment.

The decision to divest aligns with Fortis Healthcare's ongoing portfolio rationalisation strategy, focusing on strengthening its presence in specific geographic clusters where it holds a substantial presence. This move follows the divestment of Fortis Healthcare's business operations in its Vadapalani facility in Chennai in July 2023.

Sharing the rationale behind this deal, Dr Ashutosh Raghuvanshi, managing director & CEO, Fortis Healthcare Limited, said, "The proposed divestment of the Fortis Malar facility underpins our focus on optimising the current portfolio of our hospital assets with a view to prioritise our growth and expansion in other key markets and re-allocate capital judiciously. This is our second under performing asset divestment in the last 2 quarters and emphasises our resolve to improve our overall profitability and margins in the hospital segment."

Fortis Malar Hospital, a 140-bed facility, has faced legacy issues over the years. While efforts have been made to address some of these concerns, certain challenges persist, restricting further investments in the facility. The divestment is considered a prudent option for all stakeholders in light of these challenges.

The proposed acquisition by MGM Healthcare is part of its strategy to expand its footprint in Chennai. MGM Healthcare currently operates two quaternary care hospitals with a combined bed capacity of approximately 600 beds and has another 450-bed greenfield hospital under development. The acquisition of Fortis Malar Hospital will contribute to MGM Healthcare's regional growth plans.

The recent acquisition by MGM aligns with the latest trend in the industry. For instance, Zydus Lifesciences Limited, a pharmaceutical company from Ahmedabad, also concluded an acquisition of the UK-based LiqMeds Group. This strategic move is part of a trend where companies want to expand their reach and strengthen market positions.

Moreover, Quality Care (QCIL), supported by Blackstone, completed an acquisition of KIMS Health Management (KHML), a prominent hospital chain in Kerala, India. Valued at INR 3,500 Cr (approximately $400 million), this acquisition reflects the continuous evolution and consolidation within the healthcare sector.