Manipal, Fortis hospitals pursuing merger deal
27 March 2018
The boards of Manipal Health Enterprises Pvt Ltd and Fortis Healthcare Ltd will meet in the next few days to approve a proposal to merge the two hospital chains, reports quoting sources close to the development said.
Fortis Healthcare today said it has received an unsolicited non-binding offer from Manipal Health Enterprises for a merger, but said its board was still evaluating the proposal received on 23 March.
Fortis Healthcare was clarifying on media reports that the Manipal and Fortis boards may approve merger this week.
“Most probably, the board meetings of Fortis and Manipal will take place on Tuesday or the day after to discuss the merger process. A plan to acquire a majority stake in SRL Diagnostics by Manipal Health will also be discussed at the Manipal board meet,” reports quoted another source as saying.
As per the reports, the hospitals under Fortis will be first hived off into a separate listed entity. The new listed entity will then merge with Manipal Group. This will allow for listing of Manipal group. Fortis Healthcare Ltd will become a holding company with stakes in the merged entity and in SRL Laboratories.
Manipal and buyout fund TPG will invest about Rs3,000 crore to own majority in the new combined entity, the report said, adding that Manipal will pump in about 60-70 per cent of the investment while TPG will invest the rest.
TPG Capital, the buyout arm of TPG Group, holds a 25-per cent stake in Manipal Health Enterprises Pvt Ltd while Singapore-based sovereign wealth fund Temasek Holdings Pte Ltd holds 18 per cent stake.
Fortis Healthcare currently has a market capitalisation of Rs7,727 crore and liabilities of Rs3,406 crore against revenue of Rs4,573 crore in FY17, according to its audited financial results.
Fortis, however, is facing a roadblock in its sale as Japanese drug maker Daiichi Sankyo Co Ltd and the Singh brothers are in a continuing battle over Ranbaxy deal with its Japanese buyer saying that the Singh brothers had suppressed material information when they sold Ranbaxy Laboratories to Daiichi in a $4.6 billion deal in 2008.
Daiichi has approached the Delhi high court for intervention and block the Fortis sale.
Daiichi said in court that the Singh brothers were looking to get an investor in Fortis Healthcare and that the sale would dilute assets and hamper its efforts to recover damages from them.
A Singapore tribunal had ordered Singh brothers to pay Rs2,562 crore to Daiichi Sankyo in damages.