IHH Healthcare set to acquire Fortis in a Rs4,700-5,400-cr deal

Malaysian healthcare provider IHH Healthcare has agreed to pay Rs4,700-5,400 crore for a 51-per cent stake in Fortis Healthcare and agreed to an open offer at a premium to average market price of the scrip, making it the highest bidder  for Fortis.

IHH will first buy 25 per cent in Fortis Healthcare through a mix of direct acquisition and preferential allotment and then make an open offer to buy at least 26 per cent more, sources close to the development said.
IHH Healthcare outbid, the only other contender for Fortis,
IHH Healthcare has outbid TPG-backed Manipal Health Enterprises Ltd by placing a higher per share offer for the promoters and also offering to buy out Fortis’s non-promoter shareholders at a 10-15 per cent premium to the agreed purchase price.
A successful bid will allow IHH Healthcare, Southeast Asia’s largest hospital operator, to expand its presence in India rapidly.
IHH Healthcare has been steadfast in its pursuit of Fortis despite reports of alleged financial irregularities at the hospital after founders Malvinder Singh and Shivinder Singh left the company earlier this year after losing control due to mounting debt.
Besides the higher acquisition price offered to both promoters and the public shareholders, the plan given by IHH Healthcare for acquisition of RHT Health Trust (a Singapore-listed business trust that owns some of Fortis’s assets) is better than the Manipal group’s offer, say sources.
The initial acquisition of 25 per cent stake is expected to coast IHH Healthcare around ?2,200-2,400 crore while the open offer for an additional 26 per cent in Fortis will involve an investment of about Rs2,500-3,000 crore.
The Malaysian company has also readied an acquisition plan for RHT Health Trust separately through a secondary infusion and is ready to disclose the source of its funding to avoid further controversies, added the first person.
TPG-Manipal has offered to infuse Rs2,100 crore in cash into Fortis, according to sources. This will be used to buy out RHT Holdings, which is valued at Rs4,600 crore.
Fortis holds a 29 per cent stake in RHT. By keeping Fortis’s stake in RHT and a debt of around Rs1,000 crore on its books, RHT’s actual valuation may come to a maximum Rs2,500 crore.
Manipal-TPG had earlier proposed to infuse Rs2,100 crore through a preferential allotment at Rs180 a share, which would allow it to own 18.4 per cent in Fortis at a valuation of Rs9,403 crore. It also had plans to buy out Fortis unit SRL Diagnostics’s PE investors for Rs1,113.4 crore, say sources.