TPG-backed Manipal raises the stakes again in Fortis takeover battle
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Manipal Hospital Enterprises Pvt. Ltd on Monday revised its offer for Fortis Healthcare Ltd for a fourth time, as the bidding war for India’s second-largest hospital chain shows no signs of ending despite the target company’s board picking a winner last week.

Manipal, backed by private equity giant TPG, increased its offer to buy Fortis shares by 12.5% to Rs 180 apiece from its most recent offer of Rs 160 each. The latest offer values Fortis at Rs 9,403 crore ($1.4 billion), the hospital chain said in a stock-exchange filing.

The announcement came after the Fortis board, on 10 May, recommended the offer made by a consortium of Hero Enterprise Investment Office and Burman Family Office to the company’s shareholders. The board decision, made against the advice of some of its own advisers, hasn't gone down well with a section of the company's shareholders.

Hero Enterprise is led by chairman Sunil Munjal, part of the family that runs Hero MotoCorp Ltd, India’s biggest two-wheeler maker. The Burman family is the promoter of consumer goods maker Dabur India Ltd.

The Munjal-Burman combine had offered to make an upfront equity infusion of Rs 800 crore in Fortis at Rs 167 per share through a preferential allotment and another Rs 1,000 crore through a preferential issue of warrants at Rs 176 apiece. Manipal has offered to invest Rs 2,100 crore.

In its latest offer, Manipal said the Fortis board might find it challenging to get the approval of 75% shareholders for the Munjal-Burman bid. It argued that the Munjal-Burman proposal only provides partial short-term relief to Fortis and offers no long-term plan.

Manipal also said that the Munjal-Burman bid doesn’t take care of Fortis’ planned acquisition of Singapore-listed RHT Health Trust nor does it provide an exit opportunity to diagnostic subsidiary SRL’s private equity investors. Manipal has offered to buy out SRL's PE investors.

In its new offer letter, Manipal also said that a merger between Fortis and Manipal Hospitals will generate an additional operating profit of Rs 200 crore for the combined entity. This will translate to an additional Rs 50 per share for Fortis shareholders over the long term, it said.

Fortis had been looking for buyers for more than a year but legal cases against its founders, brothers Malvinder Singh and Shivinder Singh, deterred potential investors. However, suitors began eyeing Fortis when the siblings lost control of the company in early March after lenders seized the shares they had pledged to take on loans.

In late March, Fortis agreed to sell its hospital business to Manipal Hospital Enterprises Pvt. Ltd, which was backed by private equity investor TPG Capital.

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.

Subsequently, Malaysia’s IHH Healthcare, the consortium of Hero Enterprise and the Burman Family Office, China’s Fosun and KKR-backed Radiant Life Care Pvt. Ltd offered to invest in Fortis. As the bidding war intensified, TPG-Manipal, IHH Healthcare, Munjal-Burman and Radiant Life revised their offers by one or more times.

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