The US-headquartered Sutherland Global Services, a global provider of business process and technology management services with 25% of its workforce in India, has acquired Apollo Health Street (AHS), a company owned by Apollo Hospitals Group and a provider of healthcare business services and health information technology-based solutions, for an enterprise value of Rs 1,000 crore.
The transaction is expected to close by February 2013. It may be recalled that Apollo Hospitals is in the look out for buyers for over two years.
Apollo Health Street, which has an annual run rate of around $110 million, posted a revenue of R270 crore for the half-year ended September with an Ebitda margin of 18%, said A Krishnan, chief financial officer of Apollo Hospitals Group. It has an employee strength of around 3,200 people with 10 centres, including six in the US with 700 employees, said Sangita Reddy, managing director, Apollo Health Street. The company has 150 clients, mostly in the US, she added.
Apollo Hospitals, with its shareholding of close to 40% in AHS, will rake in around R225 crore out of this sale. The promoters, including Reddys and entities, hold another 13% in the company on individual basis. Major PEs such as One Equity Partners of JP Morgan, Schroder group of Europe and Temasek Holdings of Singapore hold around 20%, 7% and 10%, respectively, with the remaining being held by individual investors and employees, Sangita Reddy maintained.
?It is believed that nearly half-a-dozen companies were in race to acquire AHS, however, Sutherland was the natural choice because of its commendable network and workbase with rapid growth apart from the reason that it positioned itself strategically to acquire AHS,? said A Krishnan.
Speaking to the FE from the US, Dilip Vellodi, founder chairman & CEO of Sutherland Global Services, said: ?AHS was found to be a right fit for us to scale up our operations, not only in the US but also expanding our base to Europe, Asia Pacific, West Asia and African countries. AHS has a good track record and happened to be a pure-play healthcare BPO player and was also operating out of the US. It has the good cost structure, delivery efficiency, strong back offiice platform and stable customer base.?
AHS also has a truly global leadership team with great analytics skills, which are important to track outcome of the analysis through data, Vellodi said.
?What is interesting in this acquisition is that it happened at a right time when the US is expected to announce ?Affordable Care Act? in the near future, which calls for hospitals, healthcare service providers, insurers and citizens to join hands to take the healthcare to a newer level with a reduced cost. The $38-billion healthcare market is growing 8.5% per annum and the company is growing much stronger,? Vellodi said. The acquisition gives us a powerful value proposition going forward, he said.
Vellodi said that sensing that healthcare has huge opportunity in the US, the company enterted into this segment two years ago and has gained ground. ?With the acquisition of AHS, we expect that 15% of our $900 total revenue during 2013 fiscal will come out of this business. We intend to bring all our healthcare businesses under one umbrella, but the name remains to be decided. While we will retain all AHS employees and add more people under this business, we need to wait before we merge. We also see that nearly 25% of our employee strength will be based out of India as we include Hyderabad through AHS apart from Mumbai, Chennai and Kochi.?
According to Sangita Reddy, ?Sutherland has options to either merge with itself or can leverage AHS brand name for the next three years as they are globally working out of 35 centres, including the US, the Philippines, India, UAE, Egypt, Bulgaria, UK, Canada, Jamaica, Mexico and Colombia.?
Prathap C Reddy, founder chairman of Apollo Hospitals, said, ?In order to drive Apollo Health Street?s growth to the next stage of its evolution, it was essential to find the right strategic partner. In Sutherland, we found the ideal partner with a proven track-record of excellence in services, technology and leadership.?
Apollo Health Street?s outcome-based BPO as well as information technology solutions and clinical domain expertise supports US hospitals, physicians and health plans to improve their operations and address the challenges and opportunities created by on-going healthcare reforms in the US, including meaningful use, health insurance exchanges, ICD-10, and accountable care organisations.
