MANILA/SINGAPORE (Reuters) - A KKR-led (KKR.N) consortium said it will invest $685 million in the largest hospital group in the Philippines, seeking to capitalize on growing demand for private healthcare in Southeast Asia.
Under the deal, KKR and partner Singapore sovereign wealth fund GIC will spend $100 million to gain 6.25% of Metro Pacific Investments Corp’s (MPI.PS) hospital business, with the remainder invested in mandatory exchangeable bonds.
The bonds will give the consortium the right to swap the bonds for shares either at the time of an IPO or in 10 years, whichever is sooner.
Bankers said the deal was one of the biggest equity investments by a private equity group in Southeast Asia.
As part of the transaction, GIC will restructure its current investment in the business and reinvest alongside KKR.
Once the bonds are converted and GIC’s existing 14% stake is accounted for, the consortium will own the equivalent of 80% of the company’s shares, Metro Pacific’s Chief Financial Officer David Nicol said. But Metro Pacific will retain control of the business by virtue of voting rights attached to the preferred shares it owns, he added.
A planned IPO for the business, Metro Pacific Hospital Holdings, has been postponed as a result of the deal.
Singapore state fund Temasek and buyout firm CVC had also been in the running to buy into the hospital group, sources familiar with the matter had said previously.
“The Philippines has a very, very young population and as they grow, the rising disposable income is growing so fast that more and more people in the middle class are demanding private healthcare,” Ashish Shastry, KKR’s co-head of Asia Pacific Private Equity, told Reuters.
He added that KKR could use its experience in healthcare businesses in China, India and the United States to help the hospital group.
The funds will enable the unit to hit its new target of expanding to 30 hospitals with 5,000 beds before 2030, Augusto Palisoc, president of the healthcare group, said in a statement. It currently has 14 hospitals and around 3,200 beds.
Metro Pacific, which has interests in power, water and other sectors, is a unit of First Pacific Co Ltd (0142.HK), which is owned by Indonesian tycoon Anthoni Salim.
Bank of America Merrill Lynch and UBS were the financial advisors to Metro Pacific and GIC on the deal, which is expected to close by the year-end.
Reporting by Neil Jerome Morales and Anshuman Daga; Editing by Edwina Gibbs