Amazon, Walmart's Flipkart in talks to buy stake in US$1.1b diagnostics chain: sources

METROPOLIS Healthcare, a diagnostics chain operating in India and Africa, is looking to raise more than US$300 million and bring onboard a strategic partner by selling a significant minority stake, according to people familiar with the matter.

The company is in early discussions with several global strategic investors and other potential purchasers of the shares, said the people, asking not to be identified because the deliberations aren’t public. Metropolis, traded in Mumbai with a market value of US$1.1 billion - about half what it was at the start of the year - tapped Barclays as an adviser, they said.

A deal would likely include a sale of primary shares as well as secondary shares by existing investors, including the managing director, that could take the deal size over US$300 million.

Walmart-owned retailer Flipkart and listed healthcare chain Apollo Hospitals Enterprise are among potential strategic investors that have signed non-disclosure agreements with Metropolis, while Amazon.com has held preliminary discussions, said one of the people. Agreements are also in place with global funds including KKR & Co, TPG and Barings, the person said, while talks are ongoing with Blackstone.

Representatives of Metropolis Healthcare, Amazon, Apollo Hospitals, Barings, Blackstone, KKR and TPG declined to comment. Flipkart did not respond to emails seeking comment. A representative for Barclays declined to comment.

Shares of Metropolis fell as much as 3.1 per cent on Friday (May 20). They have halved since the start of the year amid a broader tech selloff and concerns about intensifying competition.

Metropolis runs more than 3,000 diagnostics centres as well as pathology laboratories in India and Africa. It has grown as consumers sought out branded operators for tests and scans during the pandemic. The chain was founded in 1981 by Sushil Shah, whose daughter Ameera Shah has since taken the reins. Ameera Shah currently owns 50 per cent of the company and could offload some of her shares in a secondary transaction that could increase the size of the deal, a person familiar with the discussions said.

Diagnostics chains have become targets for the likes of Amazon and Walmart, which are ramping up healthcare services to add to their retail offerings in India. Spending on preventive healthcare such as testing is rising in the country of 1.4 billion people, driven by chronic and lifestyle-related diseases and an ageing population.

Intensifying competition is driving consolidation, with online pharmacy startup Pharmeasy buying a majority stake in publicly traded diagnostics chain Thyrocare Technologies last year for US$612 million. Metropolis acquired diagnostic chain Hitech Diagnostic Centre for 6.4 billion rupees (S$113.7 million) last year. To remain competitive, diagnostics companies need to invest heavily in newer technology and equipment and strengthen their online offerings.

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Despite the hits to its market price, Metropolis said it is focusing on expansion. It plans to start 1,800 collection centres in the next 3 years, the company said in an exchange filing.  It will boost its home collection service to 200 locations within 2 years, it said in its most recent earnings filing in February. BLOOMBERG