* Fortis Healthcare to buy 23.9 pct stake in S’pore’s Parkway
* Fortis’ hospital network to rise to 62 after deal
* TPG to make 3-fold return from divestment-source
* Fortis shares up as much as 6.5 pct
* Deal valued Parkway shares at S$3.56 each, 14 pct premium (Adds details, comments)
By Kevin Lim and Sanjeev Choudhary
SINGAPORE/NEW DELHI, March 11 (Reuters) - Indian hospital chain Fortis Healthcare (FOHE.BO) will buy 23.9 percent of Singapore’s Parkway Holdings PARM.SI from U.S. buyout firm TPG Capital in an expansion drive into Asia and the Middle East.
The $685 million deal will give Fortis a foothold in Singapore and Malaysia and make it the biggest private hospital network in Asia, it said.
The move continues an overseas acquisition push by Indian companies looking for new markets and know-how. Top Indian mobile carrier Bharti Airtel (BRTI.BO) is in talks to buy the African operations of Kuwait’s Zain (ZAIN.KW) for $9 billion.
“Strategically, it is a very good deal for the company and the healthcare sector,” said Bino Pathiparampil, healthcare analyst at IIFL Capital in Mumbai.
“This deal takes Fortis to a different level and will raise the brand equity of the company in India as well,” he said.
Fortis intends to move into other parts of Asia and the Middle East, Chairman Malvinder Mohan Singh told reporters.
“Indonesia, the Philippines and Thailand are markets we would like to evaluate,” Singh told Reuters in Singapore.
Fortis has no immediate plans to raise its stake in Parkway and planned to work with the Singapore firm in expanding across the region, added Singh, who will be nominated Parkway chairman.
Fortis will be the largest shareholder in Parkway, with a stake slightly higher than the 23.32 percent held by Malaysian state fund Khazanah Nasional Bhd, according to Parkway’s website.
Fortis’ purchase follows its $187 million acquisition in August of 10 hospitals from unlisted Wockhardt Hospitals.
“It makes more sense for Fortis to acquire a strategic stake in Parkway than to go for a full-fledged acquisition as it would mean lower risk as well as lower cost,” said Sapna Jhawar, a healthcare analyst with Mumbai-based Sharekhan.
“Fortis already has free cash reserve and a fund-raising plan in place and so it should not face any difficulty in financing the deal,” Jhawar said.
Last month, the hospital chain’s board approved a proposal to raise 12.5 billion rupees ($274 million) through preference shares, overseas shares or foreign currency bonds.
Parkway has 16 hospitals with 3,400 beds spread over six countries, including India and the United Arab Emirates. It also has a controlling stake in Parkway Life REIT (PWLR.SI), a property trust that owns hospitals and nursing homes across Asia.
The latest deal will increase Fortis’ hospital network to 62, which the company said would make it the biggest hospital network in Asia, with more than 10,000 beds.
TPG [TPG.UL], which invested just under S$500 million ($358 million) in Parkway between 2005 and 2008, will make a three-fold return on its original investment once dividends and borrowings are taken into account, a banker familiar with the deal told Reuters.
TPG was represented by Royal Bank of Scotland (RBS.L) and Goldman Sachs (GS.N), a person familiar with the deal said, while Religare Capital Markets, which is controlled by Singh’s family, represented Fortis.
Thursday’s deal values Parkway shares at S$3.56 each, a 14 percent premium to the Thursday closing price of S$3.12.
Shares of Fortis Healthcare rose as much as 6.5 percent after the news but closed the day at 178.35, up 4.85 percent from previous close.
Last month, Fortis managing director Shivinder Singh said Fortis was targeting revenue of $1 billion by 2015, from about $350 million currently, but said deals would help achieve this goal faster. (US$1=46.61 rupees=S$1.3978) (Additional reporting by Harry Suhartono in SINGAPORE and Bharghavi Nagaraju and Indulal P.M. in MUMBAI) (Editing by Ian Geoghegan and Tony Munroe)