Private equity eyes Russian healthcare - source

Reuters News, 05.04.2012

April 5 (Reuters) - Russia's newest state fund and an international private equity firm are in talks to invest in Moscow's healthcare system by taking a stake in a business owned by conglomerate Sistema, a source close to the proposed deal said on Thursday.

Sistema's Medsi chain of private clinics would first buy a handful of state-run hospitals owned by Moscow's city government, creating a business worth about $800 million, the source said.

The Russian Direct Investment Fund (RDIF), along with the private equity investor, would then buy a 25 percent stake in the combined entity.

A second source familiar with the situation said that private equity firm Apax was involved, confirming a Financial Times report earlier on Thursday. Apax's last European-focused fund was just over 11 billion euros ($14 billion) in size.

It would be the first deal for the $10 billion Russian Direct Investment Fund (RDIF) that involves a traditional private equity firm.

The fund was set up last year to attract foreign direct investment into Russia, and co-invests as long as its partner at least matches it, dollar for dollar.

The RDIF, which is state-backed but run by private equity specialist Kirill Dmitriev, has invested alongside the European Bank for Reconstruction and Development (EBRD) into Moscow's MICEX-RTS bourse and with Xenon Capital into power generator Enel OGK-5.

Sistema's other assets include top mobile phone operator MTS and mid-size oil producer Bashneft.

Sistema confirmed in a statement that Medsi was merging assets with a large group of healthcare institutions in Moscow to operate under the Medsi name. Following the deal, Medsi will operate 22 outpatient clinics in Moscow, it said.

Investment funds will make an investment into Medsi, committing just over $200 million to buy a 24.98 percent stake, the release stated, without naming which funds these are.

Apax and the RDIF declined to comment.

 (Reporting By Megan Davies; Additional reporting by Maria Kiselyova; Editing by Tim Heritage and Helen Massy-Beresford)