EXPERTS SAY THAT LIKE IN THE U.S., IT’S THE BRAND, RATHER THAN A STAR DOCTOR, THAT ATTRACTS PATIENTS TO MANIPAL HOSPITALS.
IN THE SUMMER OF 2020, Ranjan Pai was fighting two battles. On one hand, the chairman of Manipal Education and Medical Group (MEMG) was trying to
limit the effects of a national lockdown on his hospital chain, Manipal Hospitals. On the other, the 48-year-old billionaire entrepreneur was trying to salvage a big-ticket acquisition that would kickstart his long-held dream of a pan-India hospital chain.
Then in November, Bengaluru-based Manipal Health Enterprises Private Limited (MHEPL), which runs Manipal Hospitals, announced it would buy Columbia Asia Hospitals in India for about ₹2,200 crore in cash. That will give the predominantly south Indiafocussed MHEPL a presence in cities such as Kolkata, Gurugram, Ghaziabad, Patiala, and Pune. The combined entity will operate 7,300 beds in 27 hospitals across 15 cities, making it India’s second-largest hospital chain after Chennai-based Apollo Hospitals.
The deal not only helps Pai—a doctor by training, but better known as a successful entrepreneur and investor—reduce MHEPL’s dependence on a few geographies and hospitals, but comes as a sort of vindication after previous failed attempts at mega deals. The first was in 2017, when Pai and TPG Capital, one of the world’s largest private equity firms and a long-term MHEPL investor, went after Gurugram-based Fortis Healthcare, a deal that would have catapulted Manipal Hospitals past Apollo Hospitals. The second marquee deal that fell through was for Gurugrambased Medanta in 2019.
It was sometime in the middle of that same year that Seattle-based Columbia Pacific Management approached Pai to buy the 11 hospitals it ran in India. The timing was perfect for Pai, who has an aggressive growth-by-acquisition mindset but is known to be a prudent dealmaker. “You always come out wiser from your past experiences,” says Pai, looking back at the twists and turns in the months-long bidding war for Fortis. MHEPL thrice revised its offer for Fortis and its subsidiary, SRL Diagnostics, the last of which was about ₹3,300 crore. Eventually, Malaysia-based IHH Healthcare acquired Fortis for ₹4,000 crore.
“Unlike the Fortis deal, this [Columbia Asia Hospitals] deal was a more private deal, with a clear shareholding pattern. This was a combination of both parties wanting to do a deal and willing to compromise to get it done,” says Pai. The deal was supposed to close in March 2020, but the onset of the Covid-19 pandemic and the ensuing national lockdown put paid to that.
In late March last year, Pai got on a long phone call with Nate McLemore, managing director for international healthcare at Columbia Pacific Management, to discuss the implications of the lockdown and putting the deal on hold.
“We waited till June to reconnect. We reworked on the deal a bit and eventually went ahead with it,” says Pai.
MHEPL will control 60% of the combined entity, while TPG Capital will own 21.5%. The remaining 18.5% will be held by another MHEPL investor, Sheares Healthcare, a unit of Singapore’s state-owned investment company Temasek Holdings. Columbia Pacific Management sold its Southeast Asia business—one clinic and 17 hospitals across Malaysia, Indonesia, and Vietnam—to Malaysia-based conglomerate Hong Leong Group and alternative asset firm TPG for about $1.2 billion in 2019.
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