Max India is diluting its stake in Max Healthcare in favour of its South African partner Life Healthcare in an all-cash deal of about ₹794 crore. With this, both Max India and Life Healthcare will hold equal stakes in Max Healthcare.

According to the deal, Life Healthcare, which has about 52 hospitals in South Africa, would give about ₹383 crore directly to Max, while there would be a fresh issuance of shares, following which Max and Life are expected to both own 46.4 per cent stake in Max Healthcare. At present, Max India holds just over 66 per cent in the company.

But, the final deal size will depend upon Max India’s third partner in the venture — International Finance Corporation — which currently holds 7.5 per cent stake. IFC would have the option of either diluting its stake or maintaining it at 7.5 per cent.

The joint venture partners would have equal board representation once the deal is completed. However, the Chairman of the company would be from Max India. The brand name would also remain unchanged as Max Healthcare.

Life Healthcare will pay ₹ 67.50 per share to equalise its stake in the healthcare brand. The proposal received their respective boards nod on Tuesday.

Rahul Khosla, Managing Director, Max India, said that the deal values Max Healthcare at about ₹3,650 crore (equity value stands at about ₹2,884 crore).

The arrangement is likely to close by the end of August or September, Khosla added. The deal, in which Max India will sell 13 per cent stake directly to the South African major, will help the company pare some of its debt, which stands at about ₹750 crore, along with funding expansion.

The deal would still require nod from the Competition Commission of India and the South African Reserve Bank. Life Healthcare had bought 26 per cent stake in Max Healthcare in January 2012 for about ₹516.5 crore at ₹50.24 a share.

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