China’s Fosun International group is in talks to buy Chennai-based diagnostics and radiology labs chain Medall Healthcare after a deal between Nasdaq listed Constellation Alpha and the PE-investor-owned healthcare company fell through in December because of failure to meet certain deal conditions, according to people in the know.
The $100-billion Chinese family owned conglomerate is holding negotiations with Medall’s investors, New York-based private equity fund Siguler Guff and homegrown Peepul Capital, according to the sources.
Fosun is yet to make a formal financial offer for Medall but will do so in the coming weeks. Its offer is likely to be at a discount to the price that was offered by the Palm Beach, Florida-based Constellation Alpha, the sources said.
The US company had announced in August last year that it had agreed to purchase a 93% stake in Medall for around Rs 1,450 crore. The payout for the deal was to be staggered over a period of time but fell through in December as per a filing Constellation Alpha made with Nasdaq.
Fosun has completed due diligence on the company, according to two people familiar with the matter.
“Fosun would not be able to comment on specific opportunities,” Navjeewan Khosla, managing director, healthcare holdings at Fosun international said in response to ET’s queries.
Mails sent to Medall’s investors Siguler Guff and Peepul Capital’s co-founder Sandeep Reddy did not elicit a response till press-time Tuesday.
Medall was founded by serial entrepreneur Raju Venkatraman and is a dominant player in the South Indian market with nearly 185 labs.
Unlike other pathology chains that offer only blood-based sample testing, Medall derives a substantial portion of its revenues from radiology services such as scans and MRI’s.
The company has been in play for a while as the private equity investors have been looking for an exit for more than a year. Peepul Capital, which owns nearly 80% of the company, had initially invested Rs 300 crore to buy its stake.
Financial investors have taken large bets on diagnostics companies in the hope of handsome returns on their investments. More recently, US-based PE investor Carlyle exited its investment in Mumbai-based Metropolis Healthcare, a diagnostics chain that completed its IPO two weeks ago.
Metropolis’ IPO was subscribed almost six times and the company’s shares are trading at a premium of nearly 8% to the price at which they were issued to investors. It raised Rs 1,200 crore from the offering.
Earlier, investors such as Westbridge Capital and TA Associates have made handsome gains by selling their stakes in the IPO of Dr. Lal’s Pathlabs.
Fosun has been expanding its investment portfolio in India. The group had bought Gland Pharma from KKR in a $1billion-plus deal in 2017.
It is also an investor in online logistics company Delhi very through its VC investment arm and had also submitted a bid for Fortis Healthcare which was eventually acquired by Malaysia’s IHH.
Fosun operates hospitals in China and is estimated to own nearly 40% of Portugal’s banking and financial services industry through its holding in some of the large banks and insurance companies there.
Source: Economic Times