IHH, KKR submit binding bids for Fortis, Manipal revises bid
25 April 2018
Malaysian group IHH Healthcare Bhd and KKR-backed Radiant Life Care submitted binding offers for Fortis Healthcare Ltd on Tuesday to compete with Manipal Healthcare Enterprises-TPG and a joint offer from Hero Enterprise Investment-Burman Family Office.
The moves come a day before the deadline to submit offers to be placed in front of an external expert committee set up by the Fortis board last week to review potential deals with the hospital group.
IHH has submitted a binding offer to infuse Rs650 crore immediately into Fortis Healthcare, while Radiant-KKR have submitted a binding offer to purchase Fortis Mulund for Rs1,200 crore without any due diligence.
IHH was considered virtually out of the race for Fortis after it said earlier this month that Fortis Healthcare had declined to engage with the company regarding a takeover offer citing binding agreements made with other parties (See: IHH out of race for Fortis as board refuses to weigh offer
Manipal-TPG also submitted a revised offer, which includes a premium of Rs1,319 crore to Fortis Healthcare shareholders over and above the equity valuation of Rs5,003 crore of Fortis’ hospital business and a proposal to purchase shares representing 5 per cent of SRL Diagnostics share capital for the same price being paid for the purchase of stake in SRL from PE investors.
IHH’s revised offer proposes an “immediate injection” of primary equity, without due diligence, by preferential issue and allotment of equity shares at Rs160 per share. In exchange for this, IHH has asked for the right to appoint two directors on the Fortis board.
The binding commitment is subject to regulatory and shareholder approval and confirmation that IHH will be given “immediate access” to carry out legal and financial due diligence to evaluate a subsequent infusion of Rs3,350 crore into the company, which is non-binding.
“The revised IHH proposal is a simple and clear proposal that is easy to execute and therefore provides a significantly higher degree of certainty,” IHH stated in a letter to Fortis.
The immediate infusion of Rs650 crore is to be applied primarily towards payment of immediate dues to employees and creditors as well as easing the debt servicing needs of the company, IHH told Fortis.
The additional Rs3,350 crore is to be infused after completion of three weeks’ due diligence from the day IHH is granted access to the data room “fully populated” with information like the status of material litigations across priority Fortis hospitals in Delhi and Mumbai.
IHH further wants details of any investigations under way by the Securities and Exchange Board of India, the Serious Fraud Investigation Office, the Enforcement Directorate and other regulators.
Meanwhile Radiant Life Care told Fortis in its revised offer letter on Tuesday that its binding offer to buy Fortis Mulund hospital for Rs1,200 crore would provide the company an immediate liquidity of approximately Rs680 crore.
Like IHH, its offer also contains a nonbinding element to spin off SRL Diagnostics Fortis’ diagnostics business, so that Fortis Healthcare can run an independent competitive sale process.
Radiant proposes a per share value of Rs170 per share for FHL if the valuation achieved for 100 per cent equity value of SRL is Rs4,000 crore. If this value is Rs4,500 crore, it proposes a per share value of approximately Rs175.
Radiant has also proposed a demerger of the hospitals business from Fortis Healthcare into a new company, where it would launch an all-cash open offer to shareholders for this new entity at a price of Rs126 per share. The offer is subject to Radiant being able to acquire 26 per cent or more shares of the new company through the open offer.
“We believe that in order to maximise value for the FHL shareholders, the board of directors of FHL should facilitate a competitive value discovery process, which allows interested suitors to carry out due diligence in order to attract additional binding offers,” Radiant Life Care told Fortis in a letter on Tuesday.
“However, we also understand that FHL has an urgent cash requirement and hence, due to liquidity constraints, FHL has been unable to run a formal auction process, and is only evaluating binding offers at this stage,” it stated.