IHH Healthcare sole contender for Fortis as TPG, GA drop out
MUMBAI: IHH Healthcare Bhd., Asia’s largest healthcare group, remains the sole contender for acquiring Fortis Healthcare Ltd, after TPG Capital LP and General Atlantic LLC dropped out of the race owing to differences over valuation, two persons aware of the development have said.
A deal may value the Fortis hospital chain at $1.8-2 billion (₹12,900 crore) or at ₹230-250 per share, one of the two persons said on condition of anonymity. At present, Fortis has a market value of ₹9,993 crore. Fortis shares closed at ₹193 on the BSE on Friday.
IHH Healthcare operates the Parkway Pantai hospitals in Singapore, Malaysia, China, Brunei and the United Arab Emirates (UAE).
It has a strong presence in India, which it entered in 2015 by buying a 51% stake in Hyderabad-based Continental Hospitals Ltd for ₹300 crore and a 74% stake in Global Hospitals Pvt. Ltd, also in Hyderabad, for ₹1,280 crore.
As of March 2017, Fortis Healthcare Holdings Pvt. Ltd (FHHPL), the holding company controlled by brothers Malvinder Mohan Singh and Shivinder Mohan Singh, held a 52.2% stake in Fortis Healthcare.
Fortis Healthcare earned revenue of ₹4,574 crore at the group level in the last fiscal year; the hospital business revenue was ₹3,712 crore.
The diagnostics business under SRL Diagnostics Pvt. Ltd earned revenue of ₹795 crore, according to the company’s website.
“IHH is always looking at various value accretive opportunities. However, it is not appropriate for us to comment on specific transactions and we will update the market if there are any material developments,” said an IHH Healthcare spokesperson.
A spokesperson for Fortis declined to comment. Emails sent to TPG Capital and General Atlantic remained unanswered.
“Valuation mismatch has caused the backing out of TPG Capital, which was seeking a value of ₹210 per share where Singh brothers are keen for ₹230240 per share,” said the first per₹4,700 son cited above.
Other private equity firms which had shown interest in acquiring the Fortis hospital chain included KKR and Bain Capital. Global private equity fund KKR & Co. LP is in talks with the Singh brothers to acquire a controlling stake in Fortis Healthcare, Mint reported in January. The Singh brothers are in the process of selling various businesses to reduce the group’s debt, which stood at crore as of March 31, 2016, up from ₹3,831 crore in June 2015.
In April, the Singh brothers’ financial services firm Religare Enterprises Ltd sold its health insurance arm, Religare Health Insurance Co. Ltd, to a consortium of investors led by private equity firm True North Managers LLP.
A legal battle between Japanese drug maker Daiichi Sankyo Co. Ltd and Singh brothers remains a hurdle for closing the deal to sell Fortis anytime soon.
Daiichi, which claims the Singh brothers had suppressed material information when they sold Ranbaxy Laboratories Ltd to the Japanese drug maker in a $4.6 billion deal in 2008, has approached the Delhi high court for intervention and is blocking the Fortis sale.
In March, the court asked the Singh brothers to seek its approval before selling their stake in Fortis Healthcare. Daiichi said in court that the 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.
The Delhi high court case relates to enforcement of an arbitral award in proceedings initiated by Daiichi against the Singhs in relation to its 2008 purchase of Ranbaxy, which Sun Pharmaceutical Industries Ltd subsequently bought for $3.2 billion. A Singapore tribunal ordered the brothers to pay a sum of ₹2,562 crore to Daiichi Sankyo in damages.