Foreign Private Equity Firm Will Soon Control The Medical City
CVC Capital Partners is about to end the five-year dispute on being the top stakeholder for one of the country’s premier hospitals, The Medical City.
In a report previously launched by the Philippine Statistics Authority (PSA), it was revealed that private hospitals are among the leading sector in terms of the number of establishments that they have. They also happen to have incurred one of the highest expenses—compared to general public hospitals.
Unlike general public hospitals which are owned by the government, private hospitals are owned by stakeholders who get to make decisions for hospital operations. In fact, according to the Department of Health, there are about 1,071 private hospitals in the country. And one of the biggest private hospitals in the Philippines is The Medical City (TMC) which has one flagship complex, four provincial hospitals, and over 50 clinics in Metro Manila and in selected provinces.
Several disputes have taken place to discuss the ownership of the said hospital. However, Luxembourg-based private equity and investment firm CVC Capital’s move to acquire a majority stake in the said hospital will lead to several changes that give them control over it. Here are more details about it.
About the Major Stake Acquisition
CVC Capital will be taking a 60% position in TMC’s Philippine assets and operations. They purchased new shares that were issued by Professional Services Inc. as well as some existing shares that they bought from the current owners. According to a hospital official, CVC Capital’s total buy-in will be worth PHP 15 billion for TMC’s local businesses.
Meanwhile, the hospital has already sent out tender offer notices to their stockholders—offering them to buy some 2.4 million shares held by the minority at PHP 2,932.51 apiece for a total consideration of a little over PHP 7 billion.
“There will continue to be an expansion in existing hospitals and clinics, which have suffered from lack of capital because of the demands of the Guam operation, plus filling out a more complete national network for health care with ventures and acquisitions,” says a hospital official from The Medical City.
He also added that CVC Capital, despite being a financial institution, “has experience in investing in hospitals, partnering with local management to create value for all stakeholders.” Adding to that, he said, ”Within Asia, they have major stakes in Indonesia, Vietnam, and Indian hospital chains.”
What This Means for The Medical City
Because of the acquisition, CVC Capital will now hold eight of the hospital’s 15 board seats. Despite that, it was reassured that Jose Xavier Gonzales will still remain as the board’s chairperson while Dr. Eugenio Ramos will still be the president and CEO.
In accordance with TMC’s concerns, CVC Capital’s buy-in will also include all the operations in Clark, Pangasinan, Iloilo, the South Luzon Hospital and Medical Center in Laguna, as well as the Medical Arts Tower in Pasig City. However, the deal excludes the healthcare businesses in Guam since those remain to be owned by their existing shareholders.
Provided the changes being implemented for TMC, their existing shareholders have already received the broader details of the deal that involves CVC Capital Partners and the hospital’s key officials. That way, all of them can be in line with the upcoming plans that aim to place the institution forward with fresh equity.
In the case of big companies such as hospitals, shareholders are important people in managing the entirety of the company, or in this case, The Medical City. By owning parts of the company’s shares, they have certain rights and responsibilities when it comes to operations. Their shares also give them a right to reap some of the rewards along with the success of their businesses.