IHH Healthcare to divest 30% stake in China unit for RM689.6m

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KUALA LUMPUR (Nov 11): IHH Healthcare Bhd, the world's second largest private healthcare group by market capitalisation, is divesting a 29.9% equity stake in PCH Holding Pte Ltd – the holding entity for the group's China portfolio of primary care clinics and greenfield hospital projects – to China's Taikang Insurance Group Inc for RMB1.1 billion (RM689.6 million) cash.

In a filing with Bursa Malaysia today, IHH said its indirect wholly-owned subsidiary Parkway Group Healthcare Pte Ltd has entered into a share purchase agreement with Taikang Insurance Group, through its indirect wholly-owned unit TK Healthcare Investment Ltd for the proposed deal.

Following the transaction, PCH will become an indirect 70.1% subsidiary of IHH. 

In a separate statement, IHH said the proceeds from the divestment will be used to effect a combination of a primary subscription of PCH’s shares and a secondary purchase of PGH’s shares in PCH. The primary proceeds will be mainly deployed as growth and working capital for PCH. 

The transaction is subject to both parties fulfilling the necessary conditions for completion, including regulatory approvals.

"The group has operated in its key growth market of China for more than a decade and currently has a network of primary care clinics and hospital projects across China. IHH and Taikang Insurance Group will be jointly funding future projects in proportion to their shareholding," said IHH.

It added that the strategic partnership will allow PCH to leverage on the complementary strengths of both parties, realising business and healthcare operational synergies, to drive further growth in China. Potential areas of collaboration include referrals and coverage at PCH’s primary care clinics and hospitals for Taikang Insurance Group’s clients.

IHH managing director and chief executive officer Dr Tan See Leng said the proposed deal will allow the group to significantly accelerate its plans to grow the clinic networks and hospital portfolio in China.

"This partnership builds on our shared belief in the long-term growth prospects and demand for private healthcare in the country (China),” he added.

IHH said the proposed transaction will not have any effect on its issued and paid-up share capital and substantial shareholders’ shareholdings. "There will not be any material effect on the earnings, net assets or gearing of IHH for the financial year ending Dec 31, 2016."

IHH shares fell eight sen or 1.25% to close at RM6.31 today, giving it a market capitalisation of RM51.94 billion.