Narayana Health Eyes Controlling Stake in UK's Spire Healthcare

Spire Healthcare operates 40 hospitals and more than 50 clinics across the UK and is listed on the FTSE 250, with a market capitalization of $1.12 billion (£884.4 million).

Devi Shetty-led Narayana Health, a leading Indian healthcare provider, is in advanced discussions to acquire a controlling stake in Spire Healthcare Group Plc, the UK’s largest private healthcare player by revenue.

This marks Narayana’s second major global foray after its Cayman Islands expansion. The acquisition comes as the UK witnesses a surge in private healthcare demand driven by prolonged NHS waiting lists.

If successful, this move would position Narayana strategically in the global healthcare market.

Spire Healthcare operates 40 hospitals and more than 50 clinics across the UK and is listed on the FTSE 250, with a market capitalization of $1.12 billion (£884.4 million).

Positive Feedback from Shareholders

Narayana Health's senior leadership has initiated detailed negotiations with Spire's top institutional shareholders, reportedly receiving favorable responses.

Shetty, renowned as a heart surgeon-turned-healthcare billionaire, plans to meet activist shareholders next month to secure further support for the bid.

Narayana, with a market capitalization of INR 25,525 Cr, is also working with advisors to structure its approach and raise $500–600 million for the transaction.

Shetty and his family, who hold a 63.85% stake in the company, aim to acquire at least 51% of Spire through an open offer, with the potential of taking the company private if their stake approaches 75%.

Spire’s Ownership & Takeover History

Spire has a history of being a takeover target due to its low free float and concentrated ownership.

Nearly half of its shares (49.21%) are held by top institutional investors, including Toscafund Asset Management, M&G Investment Management, BlackRock, and Vanguard. The single-largest shareholder, Mediclinic Group, holds a 29.7% stake.

Efforts to acquire Spire have failed in the past. Mediclinic’s 2017 bid to buy the remaining 70.1% of Spire for £1.3 billion was rejected, with Spire’s board citing undervaluation.

Similarly, a £1.4 billion merger proposal in 2020 between Spire and Australia-listed Ramsay Healthcare collapsed after key shareholders opposed the offer.

Despite these setbacks, Spire has shown resilience. Its revenue grew 11.8% in the first half of 2024, with pre-tax profit increasing by 12.7%.

The company expects annual underlying profits of £255–275 million, buoyed by NHS outsourcing, which contributes a quarter of its revenue.

Opportunities & Challenges for Narayana

The potential acquisition offers Narayana an opportunity to leverage Spire’s strong position in the UK private healthcare market.

However, it also comes with challenges, including the need to align with Spire's management and shareholders.

While Spire’s CEO Justin Ash has turned around the company’s fortunes, shareholder concerns over his pay package and regulatory fines for price-fixing consultancy fees add complexity to the deal.

Narayana Health is financially well-positioned for the acquisition. The company posted a total income of INR 5,018 crore for FY2024, with net profit surging 30% to INR 789 crore.

It has a cash balance of INR 416 Cr and a debt-to-equity ratio of 0.50, providing ample headroom for a significant transaction.

On a recent earnings call, Narayana’s Vice Chairman Viren Shetty highlighted the company’s cautious approach to acquisitions, particularly within India, where private equity firms dominate through high valuations.

However, he emphasized the group's continued interest in asset-light opportunities and overseas expansion.

Narayana Health’s discussions with Spire’s shareholders represent a pivotal moment for both entities. For Narayana, acquiring Spire could solidify its global footprint, while for Spire, the deal could bring fresh capital and strategic direction.

However, with no guarantees of success, the outcome hinges on the alignment of shareholder interests and the execution of Narayana’s bid strategy.

Should the deal proceed, it would underscore the growing trend of consolidation in the global healthcare sector, with Indian players increasingly asserting their presence on the international stage.

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