The Hindu Business Line : Apollo Health buys US’ Zavata for Rs 697 cr

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Apollo Health buys US’ Zavata for Rs 697 cr

New horizons
Acquisition funded through $120 m of debt and $50 m of equity.
Both cos offer services such as revenue cycle management, claims processing and medical management.

Healthy deal: Dr Prathap C Reddy (centre), Chairman, Apollo Health Street; Mr Andrew DeVoe, CEO and President; and Ms Sangita Reddy, Managing Director, at a press conference in Chennai on Thursday. - Bijoy Ghosh

Our Bureau

Chennai, Aug. 30 Apollo Health Street, the healthcare outsourcing provider of the Apollo Hospitals Group, has acquired US-based competitor Zavata Inc for about Rs 697 crore ($170 million).

Both companies offer services such as revenue cycle management, claims processing, and medical management and post-acquisition, would have over 100 customers and 2,500 employees (in India and the US).

According to Mr Andrew DeVoe, Chief Executive Officer and President, Apollo Health Street, the merged entity expects revenues of over Rs 500 crore in 2007-08. Currently, its revenues are about Rs 400 crore.

The acquisition was funded through a combination of $120 million of debt and $50 million of equity. The equity was raised by issuing additional shares to the shareholders of Apollo Health Street — Apollo Hospitals Enterprise Ltd (which holds 47 per cent), One Equity Partners (a subsidiary of JP Morgan Chase & Co), and Temasek Holdings.

The debt came from Bank of India and Barclays Capital. The two financiers have sanctioned $140 million in multiple instruments, of which only $120 million was used.

Market strength

Apollo Health Street expects the acquisition of Zavata to strengthen its position in the growing market for healthcare outsourcing. The outsource-able part of the US healthcare market, including hospital revenue cycle management and insurance claims, is estimated at $80 billion. Apollo Health competes with Indian players such as EDS, Accenture, Wipro, and IBM. Asked if Apollo Health would go for an IPO, Ms Sangita Reddy, Managing Director, said the company was looking at various avenues including a public listing in India or US.

“We are currently working on valuations,” she said. However, the company is not eyeing another acquisition in the near future and would like to grow organically, she said.

Facility at Chennai

Apollo Health will invest about Rs 20 crore to set up a revenue cycle management facility at Chennai. With a capacity to house 2,000 employees, the company initially plans to hire 400 people in the next one year. It also has facilities in New Delhi and Hyderabad.

Related Stories:
Apollo Health close to buying US co Zavata

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