TPG Growth-backed Asia Healthcare Holdings (AHH) has held early discussions to acquire a significant stake in maternity and childcare hospital chain Cloudnine, multiple people in the know of the development told ET.
A potential deal may involve the complete exit of Cloudnine’s early backers Sequoia Capital and Matrix Partners, which together hold an estimated 33.5% stake, according to industry tracker Tracxn data. “The talks between the two parties are still evolving and may eventually not lead to a transaction,” a person briefed on the matter said.
Homegrown private equity firm True North, which invested Rs 400 crore in the hospital chain in 2015 at an enterprise valuation of Rs 1,400 crore, owns a little more than 37% stake in the company. True North will, however, stay on as an investor in the merged entity, another source aware of the development said. TPG Growth is the midmarket and growth equity arm of TPG Capital, which manages assets of about $14.5 billion across sectors such as media, technology and industrials. AHH is TPG Growth’s healthcare-focused operating and investment platform.
In India, AHH owns Rhea Healthcare, which operates mother and childcare centres under the Motherhood brand and Nova IVI Fertility, a network of infertility clinics. AHH runs 38 centres under Motherhood and Nova brands across the country, with a combined revenue of $74 million. Last year, it sold stake in oncology chain Cancer Treatment Services International (CTSI) to NYSE-listed Varian Medical Systems for $283 million, clocking handsome returns. TPG had bought a 65% stake in CTSI for $33 million in 2016.
Sources privy to the talks said AHH may look to draw synergies between Motherhood and Cloudnine going forward. According to the sources, AHH is scouting for fresh deals after exiting CTSI as it is likely to pump back proceeds from that deal to add to its portfolio in India. The transaction could be struck at three times Cloudnine’s revenue. Cloudnine reported a total revenue of Rs 430 crore in fiscal year 2019, a 19% jump from the previous financial year, according to data collated by Tracxn. Based on its revenue for financial year 2019, Cloudnine’s valuation would still be less than what it commanded when True North initially invested five years ago, a person tracking the deal said.
AHH has emerged as a key investor in India’s broader healthcare sector, having earlier backed Manipal Hospitals, drug discovery firm Sai Life Sciences and surgical sutures manufacturer Sutures India. AHH declined to comment on what it termed market speculative news. A spokesperson for Cloudnine said: “We are not undertaking any new investor discussion at this time. Our company is well capitalised and continues to grow strongly.”
Source: Economic Times