Fortis Sells Chennai Hospital for Rs 128 cr to MGM Healthcare

New Delhi, Nov 24 (PTI) Fortis Healthcare Ltd on Friday said it will sell Fortis Malar Hospital in Chennai, along with land and building assets, for over Rs 128 crore to MGM Healthcare Pvt Ltd.

In a regulatory filing, Fortis Healthcare said its certain subsidiaries have signed definitive agreements for sale of the business operations, along with land and building assets, pertaining to Fortis Malar Hospital situated at Gandhi Nagar, Adyar Chennai, to MGM Healthcare (MGM), a prominent healthcare delivery service provider.

The total sale consideration is about Rs 128 crore, it added.

The transaction comprises the divestment of the business operations of Fortis Malar Hospital, residing in the listed arm Fortis Malar Hospitals Ltd in which Fortis Healthcare owns a 62.7 per cent equity stake.

Also, it includes the sale of OPD and radiology business operations related to the Fortis Malar Hospital, including the land and building on which Fortis Malar Hospital is situated and the land parcel adjacent, all of which are residing in Fortis Health Management Ltd (FHML) -- a wholly owned arm, it added.

Besides, the transaction also covers the sale of an adjacent land parcel currently used as a parking premise, residing in Hospitalia Eastern Pvt Ltd (HEPL), which is also a fully-owned arm, Fortis Healthcare said.

Earlier, Fortis Malar Hospitals Ltd said it signed a definitive agreement for the sale of its business operations pertaining to Fortis Malar Hospital at Gandhi Nagar, Adyar, Chennai, to MGM Healthcare (MGM) for about Rs 45.5 crore.

The transaction will be an all-cash deal and is expected to be consummated by the end of January, subject to certain conditions, including the approvals from shareholders of both Fortis Healthcare and Fortis Malar Hospitals, respectively.

The divestment is a part of Fortis' ongoing portfolio rationalisation strategy to focus on deepening its presence in select geographic clusters where it has a sizeable presence, the filing said.

It follows from the divestment of Fortis Healthcare's business operations in its Vadapalani facility in Chennai in July 2023.

On the reasons for the sales of the Malar Hospital, which has around 140 beds, the company said it has been facing certain legacy issues.

"Over the past few years, with continuous efforts, a number of these issues have been resolved. However, some of the legacy aspects continue to persist, which have given rise to certain challenges for the company and constrained further investments into the facility," it said.

The matter has accentuated the need for the company to divest its business as a viable and prudent option for its stakeholders, it added.

"The proposed divestment of the Fortis Malar facility underpins our focus on optimising the current portfolio of our hospital assets with a view to prioritise our growth and expansion in other key markets and re-allocate capital judiciously," Fortis Healthcare Managing Director & CEO Ashutosh Raghuvanshi said.

He further said, "This is our second under performing asset divestment in the last two quarters and emphasises our resolve to improve our overall profitability and margins in the hospital segment."

Fortis Malar Hospitals Non-Executive Chairman Daljit Singh said, "After a number of deliberations amongst the management and the board, the proposed divestment of business operations of the Malar Hospital seems to be a practical solution in the interest of all stakeholders."

For MGM, the proposed acquisition is in line with its strategy to further expand its presence in Chennai, in addition to its two quaternary care hospitals with a combined bed capacity of about 600 beds at present and another 450-bed greenfield hospital under development.

"As a part of our long-term growth and expansion plans, MGM Healthcare has been investing in both greenfield and existing facilities to enhance care and clinical offerings for a broader patient population," MGM Healthcare Managing Director Prashanth Rajagopalan said.

He said the acquisition is a crucial step in "our planned capacity expansion nationwide, allowing us to extend our commitment to providing the best in quality, affordable and personalised healthcare".

"With this acquisition, we would bring our total bed count in Chennai to approximately 800 beds," Rajagopalan added.