Transaction:
- Ahead of the merger, Aster will purchase a 5.0% stake in Quality Care from Blackstone and TPG in consideration of primary share issuance by Aster for a 3.6% stake.
- Post the initial share acquisition, Quality Care will be merged into Aster by way of a scheme of amalgamation and named Aster DM Quality Care Limited.
- As per the stock filing, Aster DM will acquire 19 million equity shares of Quality Care India (QCIL) from Blackstone and Centella at Rs 445.8 per share by issuing 18.6 million of its own shares to QCIL’s shareholders at Rs 456.33 per share.
About Quality Care India Limited:
- Founded in 1997 by a team of India’s leading cardiologists, CARE Hospitals started its journey as a 100-bed heart institute. Now, QCIL has grown into a leading multi-specialty healthcare provider with a network of 26 healthcare centers operating over 5,150+ beds across 14 cities.
- QCIL’s healthcare troika includes CARE Hospitals, KIMSHEALTH and Evercare.
About DM Aster Healthcare Limited:
- Started in 1987 by Dr. Azad Moopen in Dubai, UAE, and has since grown into one of the largest healthcare groups based in the Middle East, India, and other regions.
- It operates a network of 19 hospitals, 13 clinics, 243 labs and 217 pharmacies in India, offering primary, secondary, tertiary and quaternary healthcare facilities across various specialties such as cardiology, orthopedics, oncology, and pediatrics.
Rationale:
- Scale: The merged entity will have a combined portfolio of four leading brands: Aster DM, CARE Hospitals, KIMSHEALTH and Evercare with a network of 38 hospitals and 10,150+ beds spread across 27 cities making it one of the top three hospital chains in India.
- The merged entity has planned adding 3,500 beds by FY27, taking its bed capacity to 13,300.
- Diversification: Geographically well diversified platform with low overlap in cities of presence.
- Enhanced Metrics: The merger is expected to result in strong financial, operational metrics and return metrics being highly accretive for investors.
- The merged entity will be valued at $5 billion (INR 43,000 crore). Its revenue will be Rs 7,314 crore.
- The combined entity is expected to achieve 18-20% revenue growth and 10-15% EBITDA growth levels, demonstrating its strengths over the next two years.
- The merger is cash neutral and is expected to be EPS accretive from 1st full year of operations.
- Growth Potential: Brownfield and Greenfield expansion.
- It plans to leverage a debt-to-equity ratio of up to 2:1 to fund future growth.
- Synergies: Combination to result in potential synergies from revenue, procurement & supply chain, capex and integration of corporate functions.
- Backing of Global Marquee Investor:Blackstone, world’s largest alternative asset manager will provide backing to this merged entity.
- Based on the swap ratio, Aster shareholders will hold 57.3% and Quality Care shareholders will hold 42.7% in the merged entity. The merged entity will be jointly controlled by Aster promoters and Blackstone, holding 24.0% and 30.7% ownership respectively and 45.3% by public and other shareholders.
- Aster is valued at a multiple of 36.6x on FY24 adjusted post IND AS EV/ EBITDA. In comparison, Quality Care is valued at a multiple of 25.2x based on FY24 adjusted post IND AS EV/ EBITDA.
- The other two players in the top three hospital chains are the Apollo group and Manipal Hospitals.
Acknowledgements:
RBI Bulletin (www.bulletin.rbi.org.in), SEBI (www.sebi.gov.in), NSE (www.nseindia.com), BSE (www.bseindia.com)
Disclaimer:
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