The combination of the two companies’ expertise is expected to result in the formation of a new entity which will create a key healthcare network in India. Credit: BENEJAM/Shutterstock.

Indian company Aster DM Healthcare and Blackstone Group are reportedly in advanced discussions, potentially setting the stage for a significant merger in the hospital industry.

Sources close to CNBC-TV18 revealed that Blackstone, which acquired a 72% stake in Care Hospitals in October last year, is contemplating a merger with Aster DM to create a new entity.

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If the transaction is finalised, the newly merged entity will be managed by the promoters of Aster DM alongside Care Hospitals and Blackstone professionals.

The proposed merger would considerably enhance the capacity of the new entity. 

Aster DM currently has a 5,000-bed capacity, while Care Hospitals also offers nearly the same number of beds.

As a result of the combination of the two companies’ expertise, the new entity is expected to create a key healthcare network.

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This network is projected to feature a combined capacity of around 10,000 beds, positioning the combined company as a significant competitor to Apollo Hospitals, the key organisation in the Indian healthcare industry.

CNBC-TV18 noted that this deal’s structure is not a cash transaction but rather a swapping of a share.

As per the arrangement, Aster DM’s promoters, led by Azad Moopen and his family, who own a 42% stake in the company, will obtain shares in the merged entity.

In exchange, Blackstone will also acquire a stake in the company.

The move will then result in the dilution of the stake of the Moopen family in Aster DM as the stake of Blackstone increases, the report said.

An Aster DM spokesperson told Business Today: “We don’t wish to comment on market speculation.”

Currently valued at around Rs190.68bn ($2.27bn), Aster DM is anticipated to command a premium due to its market position and promising growth prospects.

Meanwhile, Care Hospitals, with a valuation exceeding Rs168.00bn, is expected to enhance the overall value of the merged entity.

An open offer is anticipated to follow the merger to meet regulatory requirements.

Sources cited by Business Today have also indicated that Azad Moopen of Aster DM is expected to assume the executive chairman role.