Manipal raises Fortis offer to ₹1,060 cr
Manipal Health Enterprises Pvt. Ltd, backed by private-equity firm TPG, moved to sweeten the terms of a deal to acquire the hospital business of Fortis Healthcare Ltd. after some investors raised concerns about the initial proposal.
Manipal increased the value it will assign Fortis’s hospitals business by ₹1,060 crore ($163 million), in a revised bid to separate that business from Fortis and merge it with its own operations. Manipal, which is controlled by Ranjan Pai and backed by TPG, submitted the offer to Fortis’s board on Tuesday.
The deal is the latest in the Fortis saga, with India’s fraud watchdog and stock regulator investigating the company after Bloomberg News reported the company’s founders took at least ₹500 crore out of the firm without board approval. Brothers Malvinder Singh and Shivinder Singh have resigned from the company and have lost control of their shareholding due to mounting debt.
The revised bid values Fortis’s hospital business at about ₹6,060 crore, only a little less than the value the proposal assigns to Manipal, giving Fortis shareholders a larger stake in the combined firm, a statement from the companies said.
After the changes, Manipal’s offer would value Fortis at ₹155 a share, up from ₹140 earlier, according to a person familiar with the transaction, who asked not to be identified as the details are private. A representative for Fortis declined to comment.
“We hope that our revised offer addresses the concerns certain Fortis shareholders had raised and believe this offer is in the interests of all stakeholders, including Fortis’ shareholders,” Pai said in the statement.
Shares of Fortis climbed as much as 3.9% to ₹152.30, their highest intraday level since March 27. They traded at ₹147.55 up 0.7%, at 9.37am in Mumbai.
The new proposal calls for the merged entity to have a rights issue of up to ₹400 crore to allow shareholders to infuse fresh capital into the business and increase their stakes if they choose, according to the statement. The original proposal called for Manipal and TPG to infuse ₹390 crore.
Finally, the 30%stake in Fortis subsidiary SRL Ltd., a medical diagnostics provider which is now held by private-equity investors, will be purchased by Pai and merged with Fortis itself, according to the statement. The original proposal had Manipal buying that stake from the private-equity investors and then buying an additional 20% stake from Fortis to become SRL’s controlling shareholder. The revised proposal will remain valid for seven days, Manipal Health said.
The valuation for both Fortis’s hospital business and SRL are lower than what investors assign to listed peers of similar size like Apollo Hospitals Enterprise Ltd. and diagnostics chain Dr Lal PathLabs Ltd, according to Rakesh Nayudu, an analyst at Haitong International Securities Group in Mumbai. Also, a rights issue from the merged entity would dilute the value of the new equity Fortis shareholders get, he said.
MUMBAI: