India’s Fortis Healthcare will buy 23.9 per cent of Singapore’s Parkway Holdings from the

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US buyout firm, TPG Capital, in an expansion drive into Asia and West Asia.

The $685 million deal will give Fortis a foothold in Singapore and Malaysia and make it the biggest private hospital network in Asia, it said.

“Strategically, it is a very good deal for the company and the healthcare sector,” said Bino Pathiparampil, healthcare analyst at IIFL Capital in Mumbai. “This deal takes Fortis to a different level and will raise the brand equity of the company in India as well,” he said.

Fortis intends to move into other parts of Asia and West Asia, chairman Malvinder Mohan Singh told reporters in Singapore. “Indonesia, the Philippines and Thailand are markets we would like to evaluate,” he said.

Fortis had no immediate plans to raise its stake in Parkway and planned to work with the Singapore firm in expanding across the region, added Singh, who will be nominated Parkway chairman.

Fortis will be the largest shareholder in Parkway, with a stake slightly higher than the 23.32 per cent held by Malaysian state fund Khazanah Nasional, according to Parkway’s website.

Fortis’ purchase follows its $187 million acquisition in August of 10 hospitals from the unlisted Wockhardt Hospitals.

“It makes more sense for Fortis to acquire a strategic stake in Parkway than to go in for a full-fledged acquisition as it would mean lower risks as well as lower costs,” said Sapna Jhawar, a healthcare analyst with the Mumbai-based Sharekhan.

“Fortis has free cash reserves and a fund-raising plan in place and so it should not face any difficulty in financing the deal,” Jhawar said.

Last month, the hospital chain’s board approved a proposal to raise Rs 1,250 crore ($274 million) through preference shares, overseas shares or foreign currency bonds.

Parkway has 16 hospitals with 3,400 beds spread over six countries, including India and the UAE. It also has a controlling stake in Parkway Life, a property trust that owns hospitals and nursing homes across Asia.

The latest deal will increase Fortis’ hospital network to 62, which the company said would make it the biggest hospital network in Asia, with more than 10,000 beds.

TPG, which invested just under S$500 million ($358 million) in Parkway between 2005 and 2008, will make a three-fold return on its original investment once dividends and borrowings are taken into account, a banker familiar with the deal told Reuters.

TPG was represented by Royal Bank of Scotland and Goldman Sachs, a person familiar with the deal said, while Religare Capital Markets, controlled by Singh’s family, represented Fortis.

Shares of Fortis Healthcare rose as much as 6.5 per cent after the news but closed the day at Rs 178.35, up 4.85 per cent from the previous close.

Last month, Fortis managing director Shivinder Singh said Fortis was targeting revenue of $1 billion by 2015, from about $350 million currently, but said deals would help achieve this goal faster.

Rakesh Khar of Financial Chronicle adds:

Healthcare practice head at KPMG, Hitesh Gajaria, said “Parkway is a strategic deal highlights the financial might of Fortis.” He said that in all likelihood this would lead over a period of time to Fortis buying more stake to ensure greater control over the company. The choice of the hospital signified Fortis ambition to use the facility to tap medical tourists in a big way from the west.

The Singh brothers have reiterated Fortis desire to be a pan- Indian company first and only then target acquisitions abroad. The Wockhardt deal last year gave the typically north Indian company its first big break in west and south India.

“Parkway gave a time-bound opportunity, too tempting for Fortis to let go,” Gajaria said, explaining the decision to move out without first fully tapping the domestic opportunity.

The domestic market will keep Singh brothers fairly busy. Shivinder Singh had told Financial Chronicle in October that “by the end of this fiscal year, we would have 38 hospitals with 5,000 beds. We also have on our plate seven greenfield hospitals (five under Fortis directly and two from Wockhardt) that would come on stream over the next 30 to 48 months, taking the numbers to 45 hospitals and 7,000 beds. On a 7,000- bed capacity, he had put the top line estimates at about Rs 5,000 crore by 2014-15.

At the time of Wockhardt hospitals takeover, Singh had said the acquisition would give footprint and returns right away, unlike the earlier acquisition of Escorts Hospital in New Delhi, which he admitted “did drag Fortis initially”.