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Fortis Promoters Fund $665M Acquisition Of Their Private Firm

12 January, 2012

GIC-backed Fortis Healthcare (India) Ltd has completed the $665 million acquisition of Fortis Healthcare International Pte, a privately held firm representing overseas healthcare services business owned by its promoters Malvinder and Shivinder Singh.

Public-listed Fortis Healthcare (India) disclosed that the acquisition was completed by its wholly owned subsidiary Fortis Asia Healthcare Pte Ltd (Fortis Asia). “The purchase consideration for equity shares of Fortis International amounting to $262 million (after taking into account the outstanding liabilities of Fortis Healthcare International) is being funded through infusion of $262 million against redeemable preference shares of FAHPL issued to the promoters of the company,” it added.

This essentially means that the Singh brothers have funded their own public-listed firm to buy a company owned by them.

The redeemable preference shares carry an annualised yield of 5 per cent and are redeemable after 18 months. FAHPL has an option to redeem the preference shares before the expiry period of 18 months.

In the process, the billionaire Singh brothers joins Mukesh Ambani in the list of Indian business tycoons who have funded a public-listed company to buy other business assets owned by them or their groups.

Last week, Network18 Group stated that it was acquiring a string of regional language news, besides general entertainment TV channels under the Eenadu Group, owned by Reliance Industries Ltd (RIL), for up to Rs 2,100 crore ($395 million). In fact, RIL is indirectly funding this acquisition by bankrolling the promoter group of Network18 through equity convertible debt.

In September last year, the Singh brothers had their plan to sell their privately held healthcare services firm Fortis Healthcare International, which operates hospitals in the Asia-Pacific region, to their majority-owned, public-listed firm Fortis Healthcare (India) in the biggest ever deal in the Indian healthcare services industry.

The deal includes overseas healthcare assets including Quality Healthcare Ltd (the largest primary care network in Hong Kong with 580 centres), Dental Corporation Pty Ltd (the largest dental care network in Australia & New Zealand with 177 centres), Fortis Speciality Hospital (an under-construction specialty hospital in Singapore), a stake in the 350-bed Lanka Hospitals Corporation (Sri Lanka’s largest super speciality hospital), Hoan My Medical Corporation (one of Vietnam’s largest private healthcare provider groups with over 1,100 beds across six hospitals) and SRL Laboratories, Dubai (the largest private pathology laboratory in the UAE).

The deal has now made Fortis Healthcare the largest healthcare services firm in the country in terms of number of hospitals and bed capacity, overtaking Apax Partners-backed Apollo Hospitals. It also becomes a strong competitor to Singapore-based Parkway Hospitals in the Asia-Pacific region. Both Apollo Hospitals and Parkway are backed by Malaysian sovereign wealth fund Khazanah.

Fortis Healthcare itself is backed by GIC Special Investments, the Singapore sovereign wealth fund which picked 6.24 per cent stake in the hospital chain two months ago. Lathe Investment Pte Ltd, an affiliate of GIC, converted the foreign currency convertible bonds it subscribed in 2010 at a price of Rs 167 per share into equity shares.

Fortis Healthcare scrip lost almost half of its value after touching a price of Rs 171 last July, to shrink to Rs 81 two weeks ago. The company’s share price has recovered since and was trading at Rs 98.15, up 0.77 per cent on the BSE in a weak Mumbai market on Thursday.

Fortis Healthcare (India) has also decided to revert to its old name, less than one year after renaming itself from Fortis Healthcare Ltd. It has also made some changes to its board. Malvinder Mohan Singh, who has been a non-executive chairman, has been appointed as an executive director and will be re-designated as an executive chairman of the company.

Balinder Singh Dhillon, a non-executive director, now becomes executive director, and Shivinder Mohan Singh, managing director, has been re-designated as executive vice-chairman.

Earlier, it was announced that Vishal Bali, who had been heading operations of Fortis Healthcare International, would be the global CEO of Fortis Healthcare. The Indian operations would be headed by Aditya Vij (a former country head for General Motors India) as India CEO, who would focus on the Indian expansion. The international business would be headed by Eng Aik Meng who would focus on all expansions outside the country. Global functional heads would manage the key business functions of the combined entity.

What Next For Singh Brothers?

The Singh brothers have been playing with cash ever since they sold their flagship family business of pharmaceuticals, housed under Ranbaxy Labs, to Japan’s Daiichi Sankyo in a multi-billion dollar deal in 2008. A portion of the cash that they secured from the transaction was used to buy standalone healthcare assets in South-East Asia and it has now been sold to their majority-owned public-listed firm.

Early last year, they also sold their entire holding of 74.59 per cent in IPO-bound diagnostics chain SRL to Fortis Healthcare for Rs 803 crore.

Although it is not clear how much the Singh brothers paid to build an overseas exposure in the healthcare sector, one would expect them to have pumped out a neat profit from the string of transactions over the past two-three years.

The promoters, who also have a large business interest in the financial services sector through Religare Enterprises, have temporarily parked a large chunk of the cash back into Fortis Healthcare. However, they would soon have to think of putting more weight to back Religare or enter some new business to use the money. Which one would it be?

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Fortis Promoters Fund $665M Acquisition Of Their Private Firm

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