This article first appeared in The Edge Malaysia Weekly on February 26, 2024 - March 3, 2024

A streamlining of healthcare assets owned by US private equity firm TPG, its investee platform TE Asia Healthcare Partners and partner Hong Leong Group under one entity to create a mega healthcare group — with hospitals across Malaysia, Indonesia and Vietnam — is currently being worked on, according to sources.

“Columbia Asia will be the vehicle for the consolidation,” says a source.

The exercise could see the healthcare assets fetch a valuation of around RM15 billion. It is understood that a share swap is being considered by the parties, with a targeted completion by mid-2024.

The entity will have six healthcare services providers in its portfolio — Columbia Asia Healthcare, Ramsay Sime Darby Health Care, Beacon Hospital, Cardiac Vascular Sentral Kuala Lumpur (CVSKL), ALTY Orthopaedic Hospital and the recently completed PJ Integrated Centre of Advanced Surgery and Oncology (Picaso) — and will eventually be listed on an exchange that is yet to be decided.

TPG has declined to comment for this story. At press time, TE Asia, Columbia Asia and Hong Leong Group have yet to respond to enquiries from The Edge.

Based on a tally of hospital beds at the various facilities as disclosed on websites or annual reports, the merged entity would have 4,275 beds in total, of which 2,887 would be in Malaysia — rivalling IHH Healthcare Bhd’s 2,731 beds in the country but lower than KPJ Healthcare Bhd’s 3,357 beds. However, on a group-wide basis, IHH still leads with a total 13,298 beds as at end-2022.

Currently, Columbia Asia Healthcare Pte Ltd (CAHSG) through its subsidiaries owns and operates 22 medical facilities in Malaysia, Indonesia and Vietnam.

In 2019, Hong Leong Group and TPG acquired Columbia Asia’s hospitals in Southeast Asia for an estimated US$1.2 billion. The deal was for Columbia Asia’s hospitals in Malaysia, Indonesia and Vietnam but excluded those in India.

Then, just last November, Sime Darby Bhd announced its exit from the healthcare business with the sale of Ramsay Sime Darby Health Care Sdn Bhd (RSDH) to CAHSG’s wholly-owned unit Columbia Asia Healthcare Sdn Bhd for RM5.7 billion.

RSDH, a 50:50 joint venture between Sime Darby and Australia’s Ramsay Health Care Ltd, operates four hospitals in Malaysia and three in Indonesia.

When announcing the transaction, it was disclosed that CAHSG is 99.9% owned by HLT Healthcare Holdings Ltd, which is jointly owned by Hong Leong Group and One Health Holdings (OHH). OHH is owned and controlled by TPG-managed funds.

Aside from the TPG funds, other investors — with the two largest being the Employees Provident Fund (EPF) and a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA) — will invest in OHH with new capital to fund the transaction. Post-transaction, EPF and the unit of ADIA will have a combined shareholding of about 25% in OHH.

Meanwhile, Singapore-based TE Asia owns CVSKL, Beacon Hospital and ALTY Orthopaedic Hospital in Malaysia.

According to its website, TE Asia was established in 2014 and invests in and operates speciality hospitals and centres “in close partnership with doctors to deliver efficient and high quality healthcare across Southeast Asia”. Focusing on oncology, cardiology and orthopaedics, it manages group practices in Hong Kong, Malaysia, Singapore, Indonesia, Vietnam, the Philippines and Thailand.

TE Asia is backed by TPG.

In fact, TE Asia’s founder and CEO Eng Aik Meng serves as senior adviser to TPG Capital, where he holds various board positions in the companies TPG invests in.

Based on the recent RSDH and Columbia Asia deals as well as TE Asia’s RM270 million investment to set up CVSKL, the healthcare assets should be worth at least RM11 billion.

A simple calculation based on the RM5.7 billion price tag for RSDH and its 1,530 beds shows that the merged entity’s roughly 4,000 beds could be worth close to RM15 billion.

At last Friday’s close, IHH and KPJ Healthcare’s market capitalisations were RM54.163 billion and RM7.157 billion respectively.

Over the last few years, there has been keen investor interest in hospital operators, as observed from the Columbia Asia and RSDH deals.

In 2020, a stake in Beacon Hospital was sold to TE Asia. However, no figures were disclosed.

That same year, TPG had also considered a plan to privatise KPJ Healthcare together with its largest shareholder Johor Corp, but the plan did not materialise.

Sunway Bhd’s listing of Sunway Healthcare Group is also keenly watched by investors and shareholders of the diversified group, with speculation that it could be brought forward, earlier than the October 2027 timeline under a shareholders’ agreement with Singapore’s GIC Pte Ltd when the fund invested in the business.

RHB Research ascribed an enterprise value of RM9 billion on Sunway’s healthcare business and projected a market capitalisation of RM10 billion to RM12 billion for it when listed. 

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