KUALA LUMPUR (Sept 4): IHH Healthcare Bhd (KL:IHH), Malaysia’s biggest hospital operator, said on Wednesday that it is acquiring 600-bed Island Hospital in Penang for RM3.92 billion in cash from Comprehensive Care Sdn Bhd.

The owners of Comprehensive Care are: Affinity Equity Partners with 78%, Island Hospital's founder Mark Wee with 16%, plus 41 other individual shareholders who collectively hold 6%.

The acquisition includes the vacant land, which is valued at RM223 million with approvals secured for future development, IHH said in a statement. The transaction — to be financed with internal funds and external borrowings — is expected to be accretive to its earnings and return on equity from 2026, the company said.

IHH group chief financial officer Dilip Kadambi said the group is expecting Island Hospital to contribute "upwards of 15%" of its total annual revenue. Based on the group's FY2023 revenue of RM20.93 billion, Island Hospital's revenue contribution may come up to over RM3.13 billion annually.

"Given that we have a lot of hospitals in our network, the revenue contribution from Island [Hospital] wouldn't be so skewed that it will be a big chunk. It will still be upwards of 15% but it is not something which would clearly skew the revenue to one single hospital," he told a virtual press conference.

“We expect significant synergies from the transaction and a unique opportunity to elevate Island Hospital as a leading integrated medical facility in Asia,” said IHH chief executive officer Dr Prem Kumar Nair.

The acquisition is the latest since March when IHH acquired Timberland Medical Centre for RM245 million, a deal that also came with vacant land in central Kuching earmarked for the construction of a 200-bed tertiary hospital.

IHH, controlled by Malaysia's sovereign wealth fund Khazanah Nasional Bhd, operates in 10 countries with Malaysia, Singapore, Türkiye, India and China as key markets. With the addition of Island Hospital, IHH now owns 18 hospitals in Malaysia, including three in Penang, besides Gleneagles Hospital and Pantai Hospital.

“Island Hospital presents a transformative opportunity for us,” said Prem Kumar. “Its leading position in Penang, extensive specialist pool and clinical offerings, as well as its status as the hospital of choice for foreign patients, make it an asset that complements our growth plans in the country.”

Once the deal is completed by the year-end, IHH will have more than 1,000 operational beds in Penang. Island Hospital currently has about 119 resident and visiting specialists that attracts over 42,000 inpatient admissions and over 430,000 outpatient visits annually. The average revenue per inpatient admission is RM12,000, according to IHH.

The acquisition of Island Hospital is also expected to double IHH's medical tourism revenue in Malaysia, Dilip added. The group claims that over one in three inbound foreign patients to the country uses IHH's network of hospitals.

"We will actually increase medical tourism within the IHH network by two times from this acquisition. So that's the growth that we see going forward," Dilip said.

Citigroup Global Markets Singapore Pte Ltd is the sole financial adviser to IHH on this transaction.

IHH shares close one sen higher at RM6.39 on Wednesday, giving the group a market capitalisation of RM56.28 billion.