MPHHI gets investment from KKR, postpones IPO

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By Denise A. Valdez, Reporter

THE ANTICIPATED P83.3-billion initial public offering (IPO) of Metro Pacific Investments Corp. (MPIC)’s hospital unit — which was supposed to be the biggest listing in the Philippine Stock Exchange to date — is delayed indefinitely from its earlier fourth-quarter schedule as the company welcomed an investor that poured P35.3 billion into the company.

MPIC told the stock exchange yesterday it had signed “certain definitive agreements” for Metro Pacific Hospital Holdings, Inc. (MPHHI) with a consortium led by United States-based Kohlberg Kravis Roberts & Co. (KKR). The group is joined by Arran Investments Pte. Ltd, an affiliate of GIC Private Ltd., the sovereign wealth fund of the government of Singapore.

“After much consideration we believe we have found the best way forward for Metro Pacific Hospitals and MPIC with this new partnership with KKR,” MPIC President and Chief Executive Officer Jose Ma. K. Lim said in the statement. “While we have decided for now to postpone the initial public offering for Metro Pacific Hospitals, I thank all the people involved in helping with this effort.”

The transaction involves the consortium’s investment in new common shares of MPHHI made by KKR subsidiary Buhay (SG) Investments Pte. Ltd. through a share subscription agreement and in a mandatorily exchangeable bond issued by MPIC, made also by Buhay SG.

MPHHI sold 41.37 million new common shares to the consortium, or 2.74% of the company’s resulting outstanding capital stock and 6.25% of its aggregate par value, valued at P5.2 billion.

It said proceeds from this transaction will be allocated to opening additional hospitals and new healthcare businesses, aside from growing its existing subsidiaries, associates and joint ventures.

For MPIC, the consortium bought a P30.1-billion mandatorily exchangeable bonds, which it may trade for 239.93 million common shares in MPHHI within 10 years or upon its IPO, whichever comes sooner. Proceeds from this transaction will be used to reduce bank borrowings of MPIC.

“I am delighted that we are able to announce this new partnership in the healthcare sector… KKR’s record of assisting transformational businesses is well known, and our plans for the future of Metro Pacific Hospitals are ambitious,” MPIC and MPHHI Chairman Manuel V. Pangilinan said in the statement.

The deals are scheduled to close by the end of the year once corporate and regulatory consents have been secured. It will result in MPIC’s hold in MPHHI shrinking to 20% or 132.59 million common shares on a fully-diluted basis.

Bank of America Merrill Lynch and UBS Group AG are the financial advisors to both MPIC and GIC for the transaction, while Milbank LLP and Picazo Buyco Tan Fider & Santos will serve as their legal counsels. KKR’s legal counsels will be Simpson Thacher & Bartlett LLP and Sycip Salazar Hernandez & Gatmaitan.

If the company had proceeded with its IPO plan, MPIC would have raised P5.95 billion in net proceeds from its primary offer and P75.1 billion in net proceeds from the secondary offer.

For Timson Securities, Inc. Trader Jervin S. De Celis, MPIC made the right decision to delay the IPO for MPHHI, as this would give the company a higher financial capacity to invest in other business segments.

“I think the entry of global investment firm KKR to MPHHI is positive for Metro Pacific, although the latter’s ownership in its hospital arm will shrink,” he said in a mobile message. “KKR’s subscription to MPIC’s exchangeable bonds worth P30 billion can be used by Metro Pacific to trim its debts.”

Diversified Securities, Inc. equities trader Aniceto K. Pangan concurred, saying in a text message it is “wise” for MPIC not push through with the IPO as “they have to wait for the proper time.”

But he noted the decision may take a toll on the company’s net income. “As of last quarter, we saw how their high debt exposure has affected their bottom line. Thus, we will continue to see how this will negatively affect their net income going forward,” Mr. Pangan said.

MPIC is one of three Philippine subsidiaries of Hong Kong’s First Pacific Co. Ltd., the others being PLDT, Inc. and Philex Mining Corp. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., maintains an interest in BusinessWorld through the Philippine Star Group, which it controls.