Radiant Life Care Pvt. Ltd, a hospital chain backed by private equity firm KKR & Co., has joined the takeover battle for Fortis Healthcare Ltd after submitting a non-binding offer.
Radiant plans to demerge Fortis' hospital business and buy a 26% stake in the new entity, Fortis said in a stock-exchange filing late Thursday. The demerger will exclude Fortis' diagnostics unit SRL Ltd, it said.
Radiant’s offer values Fortis at Rs 165 per share, including Rs 39 per share for SRL. The offer to shareholders of the demerged company will be at a net value of Rs 126 per share. The per-share value of SRL is based on the assumption that the diagnostics chain is valued at Rs 3,600 crore, it said.
The offer is subject to Radiant being able to acquire 26% or more shares of the new entity via an open offer. If the offer fails, the new entity will make a preferential allotment at Rs 126 per share to enable Radiant to buy a 26% stake.
Radiant will also fund and underwrite the acquisition of healthcare assets of Singapore-listed RHT Health Trust via right issues, it added.
Radiant is the fifth suitor for India's second-largest hospital chain. TPG-backed Manipal Health, Malaysia's IHH Healthcare, China's Fosun and a consortium of Hero Enterprise Investment Office and Burman Family Office are the other bidders.
The new offer comes after the board of Fortis on Thursday decided to set up a committee to evaluate only binding offers.
KKR had bought a 49% stake in Radiant for $200 million in 2017.
Radiant started operations with the redevelopment of BLK Super Speciality Hospital in New Delhi in 2010. BLK is now being expanded into a 1,600-bed quaternary care hospital.
Later, Radiant collaborated with the Nanavati Hospital Trust in 2014 to take over the operations of the 350-bed multi-specialty Nanavati hospital in Mumbai. The company plans to expand Nanavati into a 1,000-bed quaternary care institute over the next four years.
KKR India's healthcare play
Radiant’s bid gives KKR the potential to spread its exposure to India’s healthcare sector. In 2013, KKR had backed the promoters of India’s top hospital chain operator—Apollo Hospitals Enterprise Ltd—in a Rs 550 crore deal that gave it an option to pick up a stake in the listed flagship.
Besides, KKR had backed the promoters of Metropolis Healthcare Ltd, one of the top four pathology chains in the country, in a similar-style structured financing deal in April 2015. Metropolis competes with SRL, the country’s top pathology chain.
However, KKR’s investment in India’s two largest hospital chains may attract scrutiny from the Competition Commission of India (CCI). In December 2012, then CCI chairman Ashok Chawla had said PE firms might need the regulator’s approval in case of transactions that materially alter the competitive landscape in a sector.
The entry of Radiant is the latest twist in the sale of Fortis that has seen domestic and foreign investors expressing interest to buy and revising their bids to outdo their rivals in what is set to become the biggest transaction in the Indian hospital sector.
Fortis had, last month, announced that its board approved the sale of its hospital business to private equity firm TPG Capital-backed Manipal Health.
A merger between Manipal and Fortis has the potential to create India’s largest healthcare services provider by revenue, outranking Apollo Hospitals Enterprise Ltd.
Manipal sweetened the offer last week amid growing disappointment of Fortis shareholders and a possible counter bid from Malaysia’s IHH Healthcare. The revised offer valued Fortis’ hospital business at Rs 6,061 crore, or Rs 116 per share, up almost 21% from the previous offer.
Manipal-TPG’s revised offer was followed by a surprise joint proposal from Hero Enterprise Investment Office and the Burman Family Office. Soon after, IHH Healthcare offered Rs 160 per share for Fortis.
This was followed by the entry of Fosun. The Chineses company intends to provide Rs 100 crore ($15 million) to support the immediate cash needs of Fortis and invest up to $350 million in total.
Subsequently, IHH as well as Hero Enterprise -Burman Family consortium revised their offers to invest in Fortis.
The Fortis sale has been delayed due to the legal cases against its founders, brothers Malvinder and Shivinder Singh, who lost control of the healthcare firm after their stakes plunged to low single digits.
In February, the Singh brothers had resigned from the board and now own just 0.77% in Fortis, compared to the 25% stake they held at the end of December 2017, stock-exchange filings show.