IHH Healthcare Berhad, which is majority owned by Malaysian sovereign wealth fund Khazanah Nasional Berhad, has said it is nowhere close to doing any transaction in India, raising a question mark over the fate of India's second-largest hospital chain Fortis.
Brothers Malvinder and Shivinder Singh, who control Fortis Healthcare Ltd and its diagnostics arm SRL Diagnostics, had been in talks with various potential buyers for their majority stake in Fortis. Private equity firms TPG Capital and General Atlantic had formed a consortium to bid for Fortis. However, separate media reports had said citing unnamed sources that IHH is leading the race and is close to signing the deal that could be announced in days.
Bursa Malaysia had sought IHH's response with reference to media reports saying IHH and Fortis are in an advanced stage of negotiations and due diligence.
IHH, which had acquired controlling stakes in two hospital chains in south India in 2015, would potentially catapult to become a strong competitor to Apollo Hospitals, the country's top hospital operator, if it does eventually seal a deal with Fortis. Notably, IHH was an investor in Apollo Hospitals for 12 years until it sold its entire stake in the firm last month.
IHH added that it is constantly evaluating growth opportunities in select geographies in Asia, including India.
But a separate report in The Economic Times said the deal is formally off and IHH is no longer in talks with Fortis. It attributed this to the pending lawsuit between Singh brothers and Japanese drugmaker Daiichi Sankyo.
Fortis’ share price tanked over 10% in morning trade, shaving off some $160 million off its market value. Promoters own 52.3% stake in Fortis of which over four-fifths is pledged with lenders. The promoters’ stake is currently worth Rs 4,800 crore ($743 million). Fortis shareholders include Standard Chartered Private Equity and International Finance Corporation, the private sector investment arm of World Bank.
The proceeds from the Fortis stake sale by Singh brothers are supposed to go into paying the outstanding obligations to Daiichi Sankyo and in servicing debt.
Daiichi Sankyo and the Singh brothers have been locked in a court battle over the sale of Ranbaxy Laboratories since 2013 and the Japanese pharma giant was trying to stop the sale of Fortis Healthcare on the grounds that it would hinder its ability to enforce an arbitration award.
Daiichi Sankyo had sought damages on the grounds that the Singhs had withheld crucial information when they had sold Ranbaxy for $4.2 billion in 2007. The Delhi High Court in March this year restrained Fortis’ promoters from selling any assets without its permission.
Previously, Fortis had said that the company received board approval to raise up to Rs 5,000 crore last August and that it was evaluating the best possible way to mop up the funds. The hospital chain had also said last year that it is hiving off its diagnostic subsidiary SRL, to be merged into the already listed Fortis Malar Hospitals. This process was approved by the board last year and shareholders will vote on this later this month.