The hurried footsteps of hospital managers have now become white noise at Radiant Life Care’s BLK hospital. Senior managers with Max Healthcare’s chain of 14 hospitals have been thronging these corridors for the last few months. They’ve been finalising the details of Radiant, with two hospitals—650 beds at BLK hospital in Delhi and 350 beds at Nanavati hospital in Mumbai—taking over Max’s 14.
Radiant acquired 49.7% of Max, one of the largest hospital chains in the country, in June. It may not be a majority stake, but the managers know that a foundational shift in Max’s management is afoot.
Max’s revenue for the year ended March 2018 at Rs 2,787 crore ($394 million) is over 40X that of Radiant’s Rs 67 crore ($9.5 million) in the same period. It’s an upheaval at Max. The managers are nervous about the impact of the merger on their jobs.
It sounds a bit like David taking over Goliath. But there’s a third angle here.
The final decision over Max’s operations now rests with Abhay Soi, founder, chairman and managing director of Radiant, and the new chairman of Max. But Soi’s involvement goes beyond Radiant’s stake in Max.
New York-based private equity KKR & Co acquired 49% of Radiant for approximately $200 million two years ago. Radiant has now funded the Max acquisition with an investment from KKR’s Asian Fund III. What gives Soi final authority over day-to-day operations at Max is the little fact that KKR has also bought a 4.99% stake in the merged entity, which is valued at about $1.03 billion.
Before the year ends, promoters of Max Healthcare will be left clutching about 1% stake, a senior executive at Radiant confirmed, requesting anonymity.
In December last year, Max had announced that KKR-Radiant together would hold 75.1% stake after all the approvals for the merger come through. While KKR and Soi would own 51.9% and 23.2%, respectively, the promoters of Max Healthcare would go down from 12% to 7%. The terms of the deal have evolved since then, resulting in the 1% inevitability, said the executive.
The reason? Max’ promoter, Analjit Singh, is in debt, despite his family’s legacy in the Indian pharma business.