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IHH Healthcare, TPG-backed Manipal submit new binding offers for Fortis

03 July, 2018

Malaysia’s IHH Healthcare Berhad and India’s Manipal Health Enterprises Pvt. Ltd have submitted new binding offers to acquire struggling hospital chain Fortis Healthcare Ltd.

IHH said in a filing to the Malaysian stock exchange on Tuesday that its new binding offer supersedes previous proposals and that the new offer is valid till 16 July.

Separately, a person familiar with the matter told VCCircle that Ranjan Pai-led Manipal Health had also submitted a binding offer for Fortis.

In a stock-exchange filing, Fortis said that it had received binding bids and that its board will evaluate the offers in consultation with its advisers. It didn’t name the bidders.

The new offers come after Fortis decided in late May to start afresh a bidding process for its sale. It had initially asked for fresh bids by 14 June. However, it first extended the deadline to 28 June and subsequently to 3 July.

Apart from IHH and TPG-Manipal, a consortium of Hero Enterprise Investment Office and Burman Family Office and KKR-backed Radiant Life Care Pvt. Ltd had also entered the renewed bidding process for Fortis. It couldn’t be ascertained whether they had submitted binding bids.

Separate emails sent to Manipal, Radiant Life and Hero Enterprise for comment on the binding bids did not elicit an immediate response.

The first bidding process had seen these same set of suitors bidding aggressively, leading to multiple enhanced offers. Finally, the consortium of Hero Enterprise and Burman Family Office was announced as the winner on 10 May. However, the decision was likely made against the opinion of some board advisers and had not gone down well with a section of the company’s shareholders.

Within days of the winning announcement, TPG-Manipal raised the offer to buy Fortis and later extended its validity period. IHH Healthcare also extended the validity period of its offer.

In their last proposals to buy Fortis before the renewed bidding process began, IHH had proposed to invest as much as Rs 4,000 crore in Fortis and had said it would make an immediate equity infusion at Rs 175 per share while TPG-Manipal’s offer had promised to invest in Fortis at Rs 180 per share.

Shares of Fortis jumped 6.9% on Tuesday to close at Rs 142 apiece on the BSE, where the benchmark Sensex gained 0.3%.

Fortis financials
The renewed bidding process comes in the backdrop of Fortis announcing bleak financial results recently and a barrage of legal matters associated with former promoters Malvinder Singh and his brother Shivinder Singh.

This could likely play out negatively in the valuations the bidders finally quote after some shareholders had said that the company was undervalued after the first official bid from Manipal-TPG had come in earlier this year.

Fortis last week said that its net loss widened to Rs 932 crore for the quarter ended 31 March 2018 from Rs 63.8 crore a year earlier due to continuing business challenges, impairments and provisions. For 2017-18, its net loss stood at Rs 1,009.2 crore as compared with Rs 426.1 crore the year before.

Provisions amounted to Rs 580 crore in the quarter, Fortis said, adding that recovering the amount was doubtful. Impairment losses for the year were around Rs 327 crore.

Fortis also said that it had submitted an investigation report on the alleged misuse of funds with the Securities and Exchange Board of India and the Serious Fraud Investigation Office, part of the Ministry of Corporate affairs. The investigation by law firm Luthra & Luthra revealed that there were certain systemic lapses resulting in higher provisions.

The hospital chain has said it will take legal measures against Malvinder Singh for alleged fraud. The Singh brothers, whose stake in the hospital chain has fallen below 1%, allegedly siphoned off at least $78 million from Fortis without any board approval.

Fortis has been looking for buyers for more than a year. In late March, it agreed to sell its hospital business to TPG-Manipal. But the decision led to an outcry from some minority shareholders on concerns the TPG-Manipal offer undervalued Fortis. This opened the door for other suitors to bid for the company.

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IHH Healthcare, TPG-backed Manipal submit new binding offers for Fortis

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