MPIC shelves hospital IPO as new investor enters US fund KKR, Singapore investment arm infusing P35.3 billion

MANILA, Philippines — Metro Pacific Investments Corp. (MPIC), the tollways and infrastructure conglomerate chaired by tycoon Manuel V. Pangilinan, has decided to shelve a planned initial public offering (IPO) for its hospital group after global investment firm KKR agreed to invest P35.3 billion.

MPIC announced yesterday it had signed definitive agreements under which KKR and an affiliate of Singapore’s GIC would invest in Metro Pacific Hospital Holdings Inc. (MPHHI) in the form of common shares and exchangeable bonds issued by MPIC.

MPHHI, which is led by its president and chief executive officer Augusto Palisoc Jr., has interests in 14 hospitals and approximately 3,200 beds across the country.

The amount to be invested by KKR is lower than what MPHHI could have raised had it proceeded with what could have been the Philippines’ biggest IPO.

MPIC chief financial officer David Nicol explained that KKR’s offer turned out to be more superior in terms of overall value for all the stakeholders of the hospital group – from the doctors to the patients.

“We started with the belief that the IPO would be good value for our shareholders. However, circumstances changed and a new opportunity presented itself which we feel offers a better outcome in the long-term for our management teams, doctors, employees, and most importantly, our patients. This is a better play than the IPO because we are able to raise liquidity at very good price compared to the IPO range, and we retain a significant shareholding in the business which I believe will see better value growth than the same shareholding in an IPO. I think KKR will accelerate the pace of growth and transformation in supporting [Palisoc] and his team in bringing even better patient outcomes,” Nicol said in a phone interview.

Based on the agreement, the shares were valued at roughly P125 per share.

Under the terms of the agreement, the KKR-led consortium will subscribe to P5.2 billion ($100.0 million) worth of 41.37 million new common shares in MPHHI equivalent to 6.25 percent of the aggregate par value of the company.

On a 100 percent basis, the valuation would be about P83 billion.

“ We’ve been receiving feedback on the IPO idea which is why we believe that this new arrangement with KKR is preferable. We now have the best of both worlds, liquidity to back our infrastructure projects and reduce borrowings and a great partner to help [Palisoc] and his team grow the business,’ Nicol said.

The KKR-led consortium will also invest in P30.1 billion ($580 million) bonds exchangeable for 239. 9 million common shares in MPHHI.

Proceeds from share sale would be used to support MPHHI’s potential investments in additional hospitals and new healthcare businesses. The capital will also be used to grow the company’s existing subsidiaries, associates and joint ventures.

Other proceeds will be used to reduce the company’s bank borrowings, Nicol said.

MPHHI, however, is not closing its doors to a future IPO, said Ashish Shastry, co-head of Asia Pacific Private Equity and Head of Southeast Asia at KKR.

“I think that we would support an IPO later down the track, but today we see the immediate opportunity to invest in the company’s human capital, technology, facilities and best-in-class equipment to enhance both patient outreach and doctor experience, which is enormously important. We’re already serving 200,000 in-patients and 3.5 million outpatients, but the Philippines has a young demographic and fast-growing population,” he said.

Palisoc said the cash infusion would enable the company to further grow its network to reach a new target of 5,000 beds from 3,200 and 30 hospitals from 14 at present, before 2030.

“I am delighted that we are able to announce this new partnership in the healthcare sector, which is an extension of our successful relationship with KKR with its investment in Voyager Innovations, a digital technology company of MPIC’s sister company PLDT. KKR’s record of assisting transformational businesses is well known, and our plans for the future of Metro Pacific Hospitals are ambitious,” said Manuel V. Pangilinan, chairman of MPIC and MPHHI.