New Delhi Fortis Healthcare Friday said its board has picked Malaysia’s IHH Healthcare to take control of India’s second-largest hospital chain, ending months of takeover battle.
Fortis board picked up IHH offer to infuse Rs 4,000 crore of capital by way of subscription to preferential shares, over rival TPC-Manipal consortium’s offer that included Rs 2,100 crore infusion and merger of Manipal Hospitals with Fortis Healthcare.
IHH, which will get 31 per cent stake in Fortis Healthcare through the preferential allotment of shares at Rs 170 apiece, will make an open offer for an additional 26 per cent at the same price. The open offer will cost another Rs 3,300 crore.
The offer price is about 20 per cent higher than Fortis’ closing price on Thursday.
Based on the offer price of Rs 170 per share, the implied equity valuation for 100 per cent of Fortis Healthcare is Rs 8,880 crore (RM 5.2 billion).
“The transaction is expected to be completed within 7 business days of receipt of shareholders’ and CCI’s approval, which will be obtained concurrently with shareholders’ approval and can take approximately 60-75 days,” Fortis Healthcare said in a statement.
Fortis said the proposal offers significant deal certainty given a “simpler” transaction structure and requirement for fewer approvals and a shorter time frame.
This also provides an exit opportunity for shareholders through the open offer, in case they desire, the company said.
“In terms of next steps, the company will call for a shareholder’s meeting at the earliest and look forward to shareholder’s approval,” it said.
IHH Managing Director and CEO Tan See Leng, said the acquisition would significantly increase the company’s reach across the Indian subcontinent, complementing its existing capabilities in the high-value quaternary care segment.
“IHH has already been actively expanding and deepening our presence in our home market of India over the last few years and this acquisition is a natural progression in our expansion and plans across India,” he added.
Leng further said: “With a clear and holistic strategy in place, we have developed a 100-day turnaround plan to stabilise Fortis.”
IHH further said the open offer for Fortis is expected to commence in August/September 2018, subject to regulatory approvals, including Competition Commission of India, Sebi and RBI, and close by Q3 2018.
IHH’s offer is the third one that Fortis has approved this year, with a previous offer being shot down by shareholders.
Founders Malvinder and Shivinder Singh loss of shareholding due to debt triggered the bidding war for cash-strapped Fortis. Also, there were allegations that they took funds from the company, a charge that the duo, who have since left the company, deny.
Fortis board had first accepted a merger offer from Indian firm Manipal Health Enterprises and US private equity firm TPG Capital. The bidding war, however, escalated with four other suitors throwing their hats in the ring.
Fortis then approved a Rs 1,800 crore investment offer from a consortium of Munjals-Burmans combine, which wasn’t approved by shareholders, forcing it to re-open the bidding process.
IHH’s offer includes “funds infused to be used towards completion of the acquisition of assets of RHT, SRL private equity minority shareholders and short-term liquidity needs.”
TPG-Manipal consortium had offered an infusion of Rs 2,100 crore through subscription to the preferential allotment at a price of Rs 160 per share and acquisition of stake held by private equity investors in SRL by MHEPL for Rs 1,134 crore.
Also, it entailed the acquisition of assets of Singapore-listed RHT partially by utilising proceeds of preferential allotment and partially through debt financing and merger of Manipal Hospitals (MHEPL) with Fortis at a valuation attributable to MHEPL of Rs 6,070 crore.
A rights issue/QIP post the merger to repay the bridge funding raised to complete the acquisition of assets of RHT was also part of the offer.
Fortis Healthcare Chairman Ravi Rajagopal said, “The IHH proposal offers a more strategically and financially compelling proposition along with simplicity and certainty.”
The process was relaunched on May 29 and has been conducted in a fair, time-bound and transparent manner, he added.
“The release of the audited FY 2018 financial statements was a key milestone in underpinning the overall success of the transaction,” Rajagopal said, adding the board looked “forward to continuing the dialogue with our shareholders ahead of the EGM to approve the transaction”.
The newly reconstituted board of Fortis had on May 29 initiated a fresh bidding process to meet FHL’s long-term and short-term objectives.
Three bidders (IHH, TPG-Manipal consortium, Hero-Burman consortium) were invited to participate and while Fortis received an expression of interest from Radiant-KKR consortium.
The diligence access and management interaction were offered to all the four bidders, Fortis said.