Max Healthcare sues TPG for Care Hospitals buyout, matter in Bombay High Court: Report

Max Healthcare Institute has moved Bombay High Court against TPG, the owner of Care Hospitals, after the private equity firm favoured Blackstone’s offer over Max’s takeover bid. 

Blackstone, the world's largest PE fund, has offered a price that is 15-20 per cent higher than Max Healthcare’s offer, a report in The Economic Times said on Tuesday.  

Max Healthcare, which offered Rs 3,700 crore for the takeover, has claimed that there is a breach of their term sheet agreement over a “specific performance” clause. The hearing will be held on May 3.  Max is being represented by Harish Salve and senior advocate Janak Dwarkadas. 

"The takeover battle for Care Hospitals has landed up in the Bombay High Court with Max Healthcare Institute filing a suit against private equity firm TPG after the Care owner spurned Max's bid in favour of an offer by Blackstone that was about 15-20 per cent higher," the report said quoting sources with knowledge of the matter. 

Last week it was reported that Max Healthcare and TPG have signed “deal exclusivity” for bilateral negotiations in April. Abhay Soi-led Max has already given a firm offer to TPG within the stipulated six-week window for a buyout, as per the deal, which also includes an option on the Bangladesh assets. Max had said it wanted to run the Bangladesh operations for two years before making an offer to buy it. The Care Hospitals’ valuation was pegged at Rs 5,500-6,500 crore, another ET report said.  

Blackstone has been the sole contender for Care last December after Temasek-backed Shears backed out to look into the deal of Manipal Hospitals. 

Now, Max Healthcare is claiming that their own offer was "shopped around to Blackstone despite a non-disclosure and exclusive agreement".  The Blackstone offer is said to be inclusive of the Bangladesh assets from day one. 

"Max Healthcare is citing a breach of their term sheet agreement over a "specific performance" clause. Under this, TPG should specify why it is not honouring an agreement, according to one of the persons cited above. Their legal move has been precipitated by Blackstone improving its offer after the sale process for Care was revived earlier this year once valuation expectations were lowered from the original ask of Rs 7,000-8,000 crore," the report said. 

Max was aiming to increase its pan-India presence as Care Hospitals has a strong South Indian footprint.  

Care Hospitals, which was launched in 1997 as a 100-bed cardiac hospital in Hyderabad by B Soma Raju and N Krishna Reddy and their associates, has a strong cross-border network of 17 healthcare facilities with more than 2,400 beds offering 30 clinical specialties in six Indian states and Bangladesh. It has two hospitals in Dhaka with 1,000 beds. Care is owned by TPG Growth platform Evercare. 

On the other hand, Max operates 17 facilities in India with over 3,400 beds, of which 3,271 were operational in the December 2022 quarter, which saw 68 per cent occupancy. The total occupancy in FY22 was 75 per cent, as per a Care Ratings report.