UPDATE 1-Fosun Pharma, TPG to take Chindex private in $369 mln deal

Mon Feb 17, 2014 9:24pm EST

NEW YORK/SHANGHAI Feb 17 (Reuters) - Chinese drugmaker Shanghai Fosun Pharmaceutical Group Co Ltd will become the largest shareholder in Chindex International Inc after it and private equity firm TPG said they would take the firm private in a $369 million deal.

The deal would give Fosun and TPG access to China's fast-growing private healthcare market, with the government keen to promote investment in the sector to support overburdened public hospitals and bring prices down through increased competition.

China's healthcare sector is estimated to hit $1 trillion by 2020, according to McKinsey & Company, but is bogged down by rampant corruption, skills shortages and fragmentation.

Fosun Pharmaceutical will invest up to $193.7 million in Chindex International and up to $45 million in its medical equipment supplier unit Chindex Medical Ltd, the Chinese firm said in a statement to the Shanghai Stock Exchange on Tuesday.

The deal would see Fosun Pharmaceutical increase its stake in Chindex from a current 17.45 percent to 48.65 percent. TPG would hold 48.14 percent, while Chindex founder Roberta Lipson would retain a 3.21 percent stake.

Lipson, who will stay as CEO, said the new partners and funding were needed to enable Chindex to build new facilities in China as well as "significant geographic expansion," according to a statement emailed to Reuters.

Analysts say China's premium private healthcare sector has plenty of room for growth, with less than 10 percent of demand for high-end healthcare services currently met.

Chindex focuses on private healthcare in China through its high-end United Family Healthcare chain of hospitals, as well as providing medical capital equipment and products through its Chindex Medical Ltd unit.

In China it competes with healthcare providers like Singapore-based Raffles Medical Group Ltd and Malaysia's IHH Healthcare Bhd.

Fosun, TPG and the other buyers will buy all of Chindex's outstanding common shares for $19.50 per share in cash, 17 percent above the shares' 30-day weighted average closing price.

Chindex said the deal, which is subject to approval from Chindex and Fosun shareholders as well as Chinese regulators, is expected to close in the second half of 2014.

Fosun Pharmaceutical was up 8.42 percent at 1000 (0140 GMT) on Tuesday morning, against the Shanghai composite down 0.44 percent.