TPG, General Atlantic tie up to bid for Fortis Healthcare, SRL
Photo Credit: Shah Junaid/VCCircle

Private equity firms TPG Capital Inc and General Atlantic Pvt. Ltd have formed a consortium to acquire a controlling stake in Fortis Healthcare Ltd and its subsidiary SRL Diagnostics Pvt. Ltd, a person privy to the development told VCCircle.

Over the past one year, the company owners, brothers Malvinder and Shivinder Mohan Singh, were in talks with PE firms to unlock the value of both entities. The proceeds from the stake sale will go into paying the outstanding obligations to Daiichi Sankyo Company Ltd, 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 had sought damages on the grounds that the Singhs had withheld crucial information when they had sold Ranbaxy for $4.2 billion in 2007.

Now, it seems that Daiichi Sankyo has given its consent to proceed with the Fortis deal. “Both PE firms and the sellers have taken all parties, including Daiichi Sankyo, into confidence. TPG, which has been driving this transaction, also seems comfortable with the legalities,” the person cited above told VCCircle on the condition of anonymity.

TPG, General Atlantic, Fortis Healthcare and Daiichi Sankyo did not respond to requests for comment till the time of filing of this article.

The Economic Times reported earlier today that the deal could value Fortis at about Rs 12,000 crore, a shade above its current market cap at Rs 11,444 crore. Additionally, SRL could be valued at Rs 4,500-5,000 crore

However, the deal may be undervaluing SRL, the person cited above and another person familiar with the transaction said. In comparison, Dr Lal Pathlabs Ltd, the second largest diagnostics chain, is valued at close to Rs 8,000 crore.

Fortis Healthcare had initially attempted a stake sale in SRL last year. “Even at that point, SRL was valued at over Rs 5,000 crore. A reverse listing may fetch them more in value,” the second person familiar with the developments at SRL said.

Earlier this month, Bloomberg had reported that KKR was in talks to acquire SRL for Rs 5,000 crore.

The transaction would involve TPG and General Atlantic acquiring a 26% stake in Fortis Healthcare, which would trigger an open offer, going by Indian regulations, the newspaper said.

A Times of India report quoted unnamed sources saying that the two PE firms could split the assets after the deal. While TPG could retain the hospitals network, General Atlantic would gain control of SRL Diagnostics.

In May last year, Fortis Healthcare had said that it was considering a demerger of its diagnostics chain to take it public.

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