Manipal Hospitals acquires Fortis' hospitals business

The board of directors of Manipal Health Enterprises Pvt Ltd and Fortis Healthcare Ltd (FHL) at their meeting on Tuesday approved a proposal to demerge the hospital business of Fortis Healthcare and merge it with Manipal Hospitals.

The board of Fortis Healthcare also approved the sale of a 20-per cent stake in SRL Limited to Manipal Hospitals. The resultant entity Manipal Hospitals will be a publicly traded company listed on NSE and BSE, following its merger with publicly-traded Fortis Healthcare.
The remaining FHL will be an investment holding company with 36.6-per cent stake in SRL.
The merger will create the largest hospital services provider in the country by revenue while also providing a strong promoter and shareholder base to both FHL’s hospitals businesses and SRL.
The sale of partial stake in SRL provides Fortis with over Rs700 crore in cash and offers significant growth potential and compelling business synergies.
As per the proposed transaction, Manipal Hospitals will utilise Rs3,900 crore invested by Ranjan Pai of Manipal Group and TPG to acquire 50.9-per cent stake in SRL (20 per cent from FHL and 30.9 per cent from other investors for which discussions are currently underway).
In addition, the investment will support the proposed acquisition of hospital assets owned by RHT Health Trust and the growth of the hospitals and the diagnostics businesses.
Manipal Hospitals, part of Manipal Education and Medical Group, is owned by Dr Ranjan Pai and has been backed by TPG, a leading global alternative asset firm and experienced healthcare investor, since 2015. It is the fourth-largest hospital chain in the country with a strong presence in South India and has significant growth potential. Manipal Hospitals has built a strong brand over the past 65+ years and currently owns and operates 11 hospitals (including one in Malaysia) with 2,900+ beds and employs 1,600+ doctors. It also manages operations of 3,400+ beds across multiple teaching hospitals with 1,300+ doctors.
FHL is the second-largest hospital chain in the country currently encompassing both the hospitals and the diagnostics businesses. It operates a network of 34 hospitals with 4,600+ beds employing 2,600+ doctors and 6,500+ nurses. It operates its healthcare delivery services in India, Dubai, Mauritius and Sri Lanka.
The combination of Manipal Hospitals and Fortis Hospitals will result in the creation of the largest provider of healthcare services in India by revenue with 41 hospitals in India and 4 hospitals overseas and 11,000+ installed bed capacity (including teaching hospital beds of Manipal Hospitals). It will provide a talented staff pool consisting of 4,200+ doctors, 9,300+ nurses and 11,400+ other employees across India. The hospitals’ complementary geographic footprints and combined clinical strengths will provide significant scale, revenue and cost synergies.
The proposed transaction is subject to shareholders’ approval, creditors’ approval, applicable regulatory approvals (including Competition Commission of India, SEBI, stock exchanges and National Company Law Tribunal (NCLT)) and other customary conditions.
“As an organisation we are thrilled with this transaction as it enables us to take the next bold step into our future. Much has transpired over the past 12-18 months at Fortis and in the healthcare industry at large; it’s now time to get back to working with our doctors and nurses to saving and enriching lives. We believe Manipal has built a terrific franchise and team and the coming together of our two organisations will be transformational for the healthcare industry,” Bhavdeep Singh, CEO of Fortis Healthcare, said.
“The companies make a compelling strategic fit in terms of complementary geographies, clinical strengths as well as a shared commitment to providing outstanding patient care. As the largest hospital operator in India, this will be a platform benefiting all, from the communities we serve, to our capable employees and our investors. We have an excellent opportunity to leverage this strength to expand coverage and service delivery, in response to the burgeoning demand for world class healthcare," Dr Ranjan Pai, chairman of manipal Hospitals stated.
Upon obtaining all approvals, when the demerger becomes effective, for every 100 shares of FHL held by a shareholder, the shareholder will receive 10.83 shares in Manipal Hospitals (the resultant combined hospitals business).
Walker Chandiok and Co LLP, the independent valuer jointly appointed by FHL and Manipal Hospitals, has recommended the share exchange ratio, which has been accepted by the respective boards of FHL and Manipal Hospitals. Karvy Investor Services Limited provided a Fairness Opinion to FHL on the share exchange ratio given the underlying value.