Metro Pacific hospital unit takes in new investor

Infrastructure holding firm Metro Pacific Investments Corp. (MPIC) has consummated a P35.3-billion deal to bring in a consortium led by American private equity firm KKR as a new strategic investor in its market-leading hospital chain.

MPIC retains 45-percent voting rights in Metro Pacific Hospital Holdings Inc. (MPHHI) but its economic interest was diluted to 20 percent from 60 percent. Apart from KKR, the new investor consortium which now controls 80 percent of economic interest in MPHHI includes GIC, the sovereign wealth fund of Singapore which had invested in MPHHI earlier on.

The deal was consummated through a series of transactions in common shares of MPHHI and in bonds issued by MPIC which were required to be exchanged into equity, the conglomerate disclosed to the Philippine Stock Exchange on Monday.

“We welcome KKR and GIC as investors. They not only have established track records of helping health care companies to meet their growth ambitions, but also have full confidence in Metro Pacific Hospitals’ potential to provide even more critical health care services to patients across the Philippines. Today marks the start of a new and exciting chapter for Metro Pacific Hospitals,” MPIC chair Manuel V. Pangilinan said.

Augusto Palisoc Jr., president of MPHHI, added: “The Philippine health care industry is poised for tremendous growth given the increasing demand for hospitals, clinics, and facilities that provide premium medical services. With this new investment, coupled with the expertise that KKR and GIC bring to Metro Pacific Hospitals, we will be in an even stronger position to meet patients’ needs and capture new opportunities through organic expansion, acquisitions and investments, and the adoption of new technologies.”

Jose Ma. Lim, president and CEO of MPIC, said the group was proud to have created and grown one of the largest and strongest hospital groups in the Philippines.

Ashish Shastry, cohead of Asia Pacific Private Equity and head of Southeast Asia at KKR, said: “Metro Pacific Hospitals is a world-class health care institution with a terrific team of doctors and medical practitioners who play a critical role in the lives of millions.”

Proceeds from the sale of shares in the company will be used to support Metro Pacific Hospitals’ potential investments in additional hospitals and new health care businesses.

MPHHI operates the largest private hospitals and health care network in the Philippines in terms of authorized bed capacity and revenues, with interests in 14 hospitals and around 3,200 beds across the country.

KKR made its investment from its flagship Asian Fund III. Based on a previous MPIC presentation, part of KKR-GIC’s investment was a local holding firm called Apollo, which will be 65.1-percent owned by MPIC and 34.9-percent held by the foreign consortium.

Apollo will have 56.25-percent voting rights, which suggests that MPIC will have 36.6 percent of the company’s total voting rights through this indirect stake, while 19.6-percent voting rights through Apollo will be attributable to KKR-GIC. Outside of Apollo, MPIC will have 8.77-percent additional voting rights from its remaining direct equity while KKR-GIC will have 34.98-percent voting rights through direct equity ownership.
In terms of total economic interest, however, the deal gave KKR-GIC control of 80 percent of MPHHI, combined with the existing shares already held by GIC.

This transaction valued lock, stock and barrel of MPHHI at around P83 billion ($1.6 billion). Based on management estimates, this would be equivalent to 22 times MPHHI’s prospective cash flow and 58 times likely earnings this 2019. INQ