Religare Health Trust to acquire Mohali Clinical Establishment for S$55.1m

Plus spending $13.7m on fees and considerations.

Religare Health Trust have agreed to acquire the Mohali Clinical Establishment (the land, hospital building and structure, and all rights associated with the land and building including the newly constructed oncology block, any development rights and any other future development rights over the land) for a purchase price of S$55.1m or is Rps 2,700 million.

Mohali is run and operated by Fortis and RHT will also enter into an agreement with Fortis to purchase business undertakings relating to the provision of out-patient rehabilitation and consultation services, day care services, radiology and imaging diagnostic services there. It will also buy from Fortis the immovable plant and machinery at Mohali, and sign a hospital and medical services agreement with Fortis similar to the agreements it currently has across the network.

Total cost of the proposed transaction is estimated at S$68.8 million, consisting of S$55.1 million for the Sale Deed Consideration and S$13.7m on other fees and considerations such as a S$0.8m for the Business Transfer Agreement Consideration; S$2.3 million fro the Asset Transfer Deed Consideration; S$0.6 million for the acquisition fee payable to the Trustee-Manager pursuant to the Trust Deed; and S$0.4 million for estimated costs (professional fees and diligence costs, among others.

Explaining its rationale for the acquisitions, Religare Healthcare Trust said the Proposed Transactions represent an opportunity for RHT to acquire a clinical establishment that is accredited to international standards in India and which is already operated by a leading hospital operator. The Trustee-Manager also believes that the Mohali Clinical Establishment is well positioned for the middle to upper income segment of the healthcare market in the Chandigarh Capital Region, Punjab, as well as medical tourists.

Also, the Mohali Clinical Establishment is located in the well-connected and growing state of Punjab where RHT already has a clinical establishment at Amritsar and a greenfield site in Ludhiana. The Proposed Transactions are expected to provide RHT with economies of scale in the state of Punjab.

The Mohali Clinical Establishment is also well connected to major locations in the city via road networks, and is approximately five kilometres from the Mohali railway station and 10 kilometres from the Chandigarh airport, one of the major airports in the northern region of India.

The Trustee-Manager will endeavour to ensure that the Proposed Transactions, which would add an additional 355 beds to the Installed Bed Capacity of RHT’s portfolio, would be distributions per unit (DPU) accretive for Unitholders. Assuming the Proposed Transactions were completed on the Listing Date, the pro forma DPU of RHT for the period from the Listing Date to 31 March 2013 would have increased from 3.55 cents to 3.75 cents per Common Unit.

The Proposed Transactions are also in line with the Trustee-Manager’s strategy of pursuing opportunities for healthcare asset acquisitions that will provide stable cash flows and opportunities for future income and growth. The Mohali Clinical Establishment was the first hospital set up by Fortis in 2001 and has the second highest operating revenues in Fortis’s portfolio6 . Accordingly, in respect of the Mohali Clinical Establishment, the Trustee-Manager believes that there is more certainty in the predictability of cash flows.

In addition, the new Oncology block at the Mohali Clinical Establishment (which increased the Installed Bed Capacity of the Mohali Clinical Establishment by 55) was completed in September 2013.