KKR is set to acquire a controlling 51% stake in Bengaluru-based cancer care hospital chain Healthcare Global Enterprises (HCG) from private equity peer CVC Capital Partners, said people in the know, as the US buyout group doubles down on the healthcare sector which has already seen massive PE-led consolidation.
The definitive agreements are expected to be signed between the key shareholders in the next few days, possibly as early as this weekend. The HCG board is meeting on Thursday and Friday to discuss quarterly earnings. The transaction is also expected to be discussed.
KKR is planning to buy a 51% stake from CVC Capital Partners at Rs 430-440 per share, which marks a 14-16% discount to Thursday’s closing market price of Rs 511.45 per share on the BSE, according to the people. This would spell a Rs 3,128 crore payout.
The US group will then launch an open offer for another 26%, at an expected Rs 490 per share based on the formula fixed by the Securities and Exchange Board of India. If successful, KKR will end up owning 77% of the company. At this price, the total consideration for KKR would be Rs 4,900 crore.
The hospital chain’s stock has appreciated 44% in the past six months on account of improved financial performance and in anticipation of a sale.KKR and CVC Capital Partners did not respond to ET’s emailed queries till press time.
ET was the first to report, on December 4, 2024, that KKR was closing in on the acquisition. Last year, after acquiring Baby Memorial Hospital, it made a comeback to the sector after one of its biggest paydays in India when it exited Max Healthcare.
HCG’s founding family, led by oncologist-turned-entrepreneur BS Ajaikumar, will continue to own 10.87% of the company, but Ajaikumar is expected to step down as executive chairman for a non-executive role and continue to steer the chain’s research and development capabilities.
CVC Capital Partners, which currently owns 60.36%, will retain a 9% shareholding, said the people cited earlier. The Luxembourg-based firm bought a controlling stake in HCG in June 2020 for about Rs 1,049 crore by buying new shares and convertible warrants. It acquired more shares later through a mandatory open offer.
Messages and calls to Ajaikumar for comments on the deal remained unanswered.In December last year, he told ET that he was not selling his stake.
The cancer industry is growing at a compound annual growth rate of 17% and HCG is outpacing the industry growth.
Earlier, in October 2024, KKR and CVC Capital Partners had entered into bilateral negotiations to stitch the deal. The agreement will end months of parleys with several PE groups including Bain Capital.
Goldman Sachs, JP Morgan, Allegro and Ambit are the deal advisors.
Operational since 2005, HCG currently operates 21 comprehensive centres and three multispecialty hospitals across India. The network also includes one cancer care centre in Kenya. Its debt backed growth during the Covid-19 pandemic, which disrupted cancer care services, massively dented the company’s financial performance, particularly in 2020-21. However, the company has seen improved efficiencies and has also undertaken growth projects, both organic and inorganic, in the recent past.
Late last year, HCG acquired MG Hospital in Vizag, a comprehensive care provider with 196 operational beds and healthy margins of 35%. Additionally, it inaugurated a 200-bed comprehensive cancer care centre in Ahmedabad and is adding 125 beds in North Bangalore. The company plans to add 900 incremental beds in the next four-five years to capture new opportunities. Analysts expect its profit after tax to cross Rs 200 crore by 2026-27, increasing from Rs 41 crore in 2023-24.
Currently, the stock trades at 13 times enterprise value to its earnings before interest, taxes, depreciation and amortisation estimated for 2025-26, and the industry expects a significant rerating after the KKR acquisition.“The company is well positioned to ride the upcycle,” said Ankush Mahajan, analyst with Axis Securities.
