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Malaysia’s IHH tops TPG-Manipal, Munjal-Burman offers for Fortis

13 April, 2018

The race to acquire Fortis Healthcare Ltd is heating up with the announcement that the hospital chain has received an unsolicited binding offer from Malaysia’s IHH Healthcare Berhad – the third bidder to have entered the fray to buy Fortis.

IHH Healthcare is offering Rs 160 per share subject to satisfactory completion of limited due diligence, Fortis said in a stock market disclosure.

IHH’s offer surpasses the revised bid of Rs 155 per share by Manipal Hospital Enterprises Pvt. Ltd, and the Rs 156 per share joint offer by the Munjal family’s Hero Enterprise Investment Office and Dabur’s Burman Family Office.

“As part of the proposal, IHH will work with the board and the management of the company to identify optimal financing solutions to enable the company to fulfil its commitments during the challenging phase and stay afloat,” the proposal said.

Fortis is required to respond by 18 April, 2018, according to the proposal.

IHH Healthcare operates facilities across nine countries through a network of 49 hospitals with more than 10,000 beds as on 31 March 2018. After Malaysia, Singapore and Turkey, India is the fourth home market with 1,600 beds across six hospitals and three medical centres. It had entered India in 2002 and has so far invested over $500 million, IHH said in the proposal to Fortis.

Last year, IHH, which is majority owned by Malaysian sovereign wealth fund Khazanah Nasional Berhad, had sold its entire stake in India’s largest hospital chain operator Apollo Hospitals Enterprise Ltd.

Last month, Fortis had announced that its board had approved the sale of its hospital business to private equity firm TPG Capital-backed Manipal Health.

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.

Manipal’s revised offer followed reports of discontentment among Fortis shareholders over its valuation. Ranjan Pai, chairman, Manipal Education and Medical Group, in an interview to VCCircle had said that given the complexity of the deal structure, the relative valuation has not been properly understood.

Subsequently, amid reports of growing disappointment of Fortis shareholders and a possible counter bid from IHH, Manipal had sweetened the offer. 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 Hospital’s equity valuation remained at Rs 6,070 crore.

A merger between Manipal and Fortis had the potential to create India’s largest healthcare services provider by revenue, outranking Apollo Hospitals Enterprise Ltd.

In a fresh development on Thursday, Hero Enterprise Investment Office and the Burman Family Office had jointly proposed to invest Rs 1,250 crore in the company through a preferential allotment, subject to certain conditions.

The Munjal-Burman consortium had said that their offer is “simple and does not envisage any changes to the current structure, operations, and assets” of Fortis. They added that their offer can be implemented in a fairly short period, and will allow Fortis to focus on stabilising operations and push growth. The deal with Manipal is likely to take up to 12 months to complete.

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Malaysia’s IHH tops TPG-Manipal, Munjal-Burman offers for Fortis

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