Malaysia's IHH wins race for Fortis Healthcare
13 July 2018
Fortis Healthcare Ltd today said it accepted an investment offer from Malaysia’s IHH Healthcare Bhd, ending months of uncertainty over who will get control of the Indian healthcare provider.
IHH Healthcare also announced the acquisition of a 31.1-per cent stake in Fortis Hospitals for Rs4,000 crore ($582 million) through a preferential allotment of Fortis shares at a price of Rs170 per share, valuing Fortis at approximately Rs8,880 crore ( $1.29 billion).
Cash-strapped Fortis operates about 30 private hospitals in India, where the race to cash in on a private healthcare boom is heating up.
The offer price represents a 22.3x multiple of Fortis Healthcare’s EBITDA for the last twelve months ended 31 March 2018 and 19.5 per cent and 15.3 per cent premium to the closing share price on 12 July 2018 and sixty-day volume weighted average price, respectively.
IHH Healthcare Berhad (IHH) made the acquisition through its wholly-owned subsidiary Northern TK Venture Pte Ltd, which was announced as the preferred bidder to acquire a controlling stake in Fortis Healthcare Limited.
IHH will make the acquisition through a combination of primary equity infusion and secondary purchase from public shareholders of Fortis Healthcare at an offer price of Rs170 per share.
The preferential allotment will make IHH the largest shareholder in Fortis Healthcare with 31.1-per cent stake and would trigger the requirement to make a mandatory open offer to the public shareholders of Fortis Healthcare for 26 per cent of the outstanding shares at an offer price of Rs170 per share, under the applicable provisions of Indian takeover code.
Northern TK Venture Pte Ltd, Singapore, a unit of IHH, will be issued 235.3 million new Fortis shares through a preferential allotment, giving it roughly 31 per cent of the Indian company’s total voting equity share capital.
Fortis acquisition, on completion, will subsequently trigger a mandatory cash open offer for 26 per cent equity interest in Fortis Malar Hospital at an offer price of Rs58 per share, valuing Fortis Malar at approximately $16 million.
The transformational transaction gives IHH a controlling interest in leading healthcare services provider in India, one of the fastest growing markets driven by sustainable megatrends.
IHH said in a separate statement it expects the Fortis deal to be completed in the fourth quarter and does not expect it to have any material effect on profits for the fiscal year ending December 31.
Recent developments in the healthcare industry made Fortis an attractive takeover target. Manipal Health Enterprises Ltd, along with private equity firm TPG Capital, and KKR & Co-backed Radiant Life Care Pvt Ltd had also bid for stakes in Fortis.