IHH Health to buy Fortis and SRL for $2.9 billion
DEAL STREET Fortis Hospitals to be valued at ₹14,000 cr, SRL at ₹5,000 cr
IHH Health Bhd of Malaysia, Asia’s largest healthcare group is all set to buy a controlling stake in Fortis Healthcare Ltd and SRL Diagnostics Ltd controlled by former Ranbaxy promoters Malvinder and Shivinder Mohan Singh in a deal, which values the two companies at close to $2.9 billion in a combined valuation, two people directly aware of the development have told Mint on conditions of anonymity.
“The final valuation has been agreed upon and an announcement in this regard is expected in the next few weeks” said the first person cited above.
According to the persons cited above IHH will initially buy a 26%primary stake in Fortis, which will be followed by a mandatory open offer to public shareholders. Separately, the IHH will also acquire a controlling stake in unlisted SRL Diagnostics and listed Fortis Malar Hospitals Ltd, (a Fortis arm that runs a hospital in Chennai) from the promoters.
“Both sides have agreed to an overall valuation ₹14,000 crore for Fortis Hospitals and SRL at close to ₹5,000 crore, taking the combined deal value to ₹19,000 crore or $2.9 billion” the second person said. At the current valuation, IHH which was relatively a late entrant in the race to acquire the assets, will pay close to Rs 3600 crore for a 26% stake in Fortis. “The infusion of fresh equity in Fortis Healthcare will be be used by the company to buy back Religare Health Trust (RHT), a Singapore listed business trust in which it owns 30% stake” said the persons cited above. “The buyback is expected to add annual savings to the tune of ₹400 in service fee in the ebitda of the company” the persons added.
Mint had reported in January that global PE fund TPG Capital had submitted a bid for Fortis Healthcare and in the merged entity of SRL Diagnostics and Fortis Malar Hospitals, offering to pay ₹3,000 crore for a 26% primary stake in Fortis Healthcare and another ₹1,500 crore for a majority stake in SRL Diagnostics and Fortis Malar through a secondary sale. In August, the board of Fortis Healthcare had approved the demerger of the diagnostics business and proposed to list it separately through a reverse merger with Fortis Malar Hospitals Ltd, a listed unit of Fortis Healthcare. The company currently owns 62.9% in Fortis Malar, which runs a large hospital in Chennai with an associated diagnostics business.
The deal is however likely to face opposition from by Daiichi Sankyo which moved Delhi Highcourt earlier this year to restrain the Singh brothers from selling assets, specifically Fortis Healthcare Ltd. The firm said that the Singh brothers were looking exit Fortis Healthcare which would hamper recovery of damages of ₹2,562 crore awarded by a Singapore tribunal. The Delhi High court had in March directed the brothers furnish details of all of their unencumbered assets, in order to ensure the use of such assets to satisfy an arbitral award of over ₹2,562 crore, at a later stage, if required.
Responding to a query from Mint, an IHH Spokesperson said “IHH is always looking at 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”
A spokesperson of RHC Holdings Private Limited(the holding company of the Singh brothers ) said, “We cannot comment on speculation”. “With respect to your query on litigation would like to say that the court order is applicable only in respect to the unencumbered assets to parties to the litigation, namely RHC Holding Pvt Ltd and Oscar Investments Ltd. The operating listed entities of the group & its subsidiaries including Fortis and SRL, are not party to the litigation.”
Fortis and SRL promoters Shivinder Mohan Singh (left) and Malvinder Mohan Singh
Boeing chairman and CEO Dennis Muilenburg and president (commercial airplanes) Kevin McAllister at the launch of the Boeing 737 MAX 10, at the Paris Air Show on Monday