Aster DM Healthcare (Aster) said that it has entered into definitive agreement to merge with Quality Care India Limited (QCIL) backed by Blackstone and TPG, one of the largest privately held hospital chains in India with a focus on emerging cities.
Quality Care India Limited (QCIL) engaged in healthcare business and related services through a network of multi-specialty healthcare establishments across India and Bangladesh that it or its subsidiaries own or operate from time to time. Its standalone turnover was Rs 1,136.33 crore in FY24.Ahead of this merger, Aster shall purchase 5% stake or 1,90,46,028 crore shares at Rs 445.8 per share in QCIL from Blackstone and TPG in consideration of primary share issuance by Aster for 3.6% stake or 1,86,07,969 crore equity shares at Rs 456.33 per share.
The acquisition will require an in-principle approval of the stock exchanges and the approval of the Competition Commission of India (CCIL) and it will be completed within 15 days from date of the shareholder approval or the date of the CCI approval (whichever is later).
The merged listed entity will be named Aster DM Quality Care Limited. Aster DM Quality Care Limited will have a combined portfolio of four leading brands, Aster DM, CARE Hospitals, KIMSHEALTH and Evercare. The combined entity will have a of network of 38 hospitals and more than 10,150 beds spread across 27 cities making it one of the top 3 hospital chains in India.
The merger will create a top-3 hospital chain in India, with a strong presence in South and Central India. The combined entity will benefit from a well-diversified network across 9 states, minimal geographic overlap, and a comprehensive healthcare ecosystem encompassing hospitals, labs, clinics, and pharmacies.
This strategic combination is expected to unlock significant synergies in revenue, procurement, & supply chain, capex, and integration of corporate functions. Leveraging its strong clinical capabilities, the merged entity is well-positioned for future growth. A robust expansion plan for both brownfield and greenfield is underway, targeting the addition of 3,500 new beds between FY24 and FY27.
The transaction is subject to shareholder & regulatory approvals, and other customary conditions to closing. Aster expects the merger transaction to close by Q3 FY26. The ratio for the initial share acquisition is the same as proposed for the merger.
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Subject to necessary approvals, Aster Promoters and Blackstone will hold equal representation on the board and jointly oversee the merged entity, Dr. Azad Moopen will continue as the executive chairman of the merged entity, Varun Khanna and Sunil Kumar will be promoted to the position of MD & group chief executive officer and group chief financial officer of the merged entity respectively.
Aster is valued at a multiple of 36.6x on FY24 adjusted post IND AS EV/ EBITDA. In comparison, QCIL is valued at a multiple of 25.2x based on FY24 adjusted post IND AS EV/ EBITDA. Based on the swap ratio recommended in the valuation report, the resultant shareholding of the Merged Entity will be 24.0% and 30.7% held by Aster Promoters and Blackstone respectively, with the balance 45.3% being held by public and other shareholders.
Azad Moopen, founder and chairman of Aster DM Healthcare, said, The new combined entity Aster DM Quality Care Ltd. is poised to become one of the largest healthcare players in the industry, setting new benchmarks in patient-centric care, innovation, and accessibility. The Moopen family who has been instrumental in managing Aster's India and GCC businesses will also lead the new merged entity. Thus, by combining the strengths of two pioneers, we are not only expanding our footprint but also creating a transformative force capable of reshaping the healthcare landscape.
The integration of Aster and Quality Cares extensive network and deep operational expertise with backing from Blackstone and TPG among the most respected private equity firms will enhance our ability to deliver world-class healthcare services, drive innovation, and improve patient outcomes. The merger will also provide our medical professionals with an opportunity to cater to higher and diverse patient inflows.
Varun Khanna, group managing director of Quality Care, said, This merger demonstrates our aligned cultures and value systems, and furthers our commitment to address bed shortage in Indias underserved regions. The teams at Aster and Quality Care have established a strong legacy of positively impacting patients' lives and meeting the evolving needs of communities. I look forward to leading this platform into a new era focused on healthcare excellence and serving the best interests of the patients.
Aster DM Healthcare is primarily involved in the operations of healthcare facilities, retail pharmacies, and providing consultancy in areas relating to healthcare.
The company reported consolidated net profit of Rs 96.84 crore in Q2 FY25 as compared with net loss of Rs 30.80 crore posted in Q2 FY24. Revenue from operations jumped 16.89% year on year (YoY) to Rs 1,086.44 crore during the quarter ended 30 September 2024.
The counter added 2.35% to end at Rs 499.95 on Friday, 29 November 2024.
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