Acquiring Fortis will complement IHH in India
KUCHING: The possible acquisition of Fortis Healthcare Ltd (Fortis) will complement IHH Healthcare Bhd’s (IHH) existing presence in India.
This comes as Fortis, which runs about 30 hospitals in India, has become a target of a heated takeover battle, with five entities bidding for the embattled company.
Fortis has set up an advisory committee to evaluate binding offers from suitors vying to acquire the company, or take a stake in it.
The board is set to meet today (May 10).
The research arm of Hong Leong Investment Bank Bhd ( HLIB Research) believed the move would propel IHH’s geographic and earnings footprint in the subcontinent in the midterm.
“In terms of synergistic benefits to the group, we believe that the acquisition of Fortis would complement IHH’s existing presence in India which is currently concentrated in the southern regions,” HLIB Research said.
It noted that currently, India comprises of only one per cent earnings before interest, tax, depreciation and amortisation ( EBITDA) contribution as at FY17.
According to HLIB Research, over the course of the past few weeks, IHH has made several revised offers to the board of Fortis expressing its interest in “participating in Fortis and its affiliates”.
“IHH’s initial non-binding offer was for 40 billion rupees (circa RM2.4 billion) in totality for an equity portion of Fortis via a preferential issue and allotment of equity shares at 160 rupees per share (circa RM9.42),” HLIB Research said in its research note.
“The offer price has since been revised however we understand that IHH’s absolute total value of the investment (INR4,000 crore) is fixed.”
HLIB Research recalled that IHH’s initial offer on April 16 was rebuffed due to its non-binging nature.
The research arm noted that it has been understood that due to the influx of offers, the board of Fortis has appointed an expert advisory committee to review all ‘binding offers’ on April 26 and will convene on the May 10 to consider offers.
It further noted that under the terms of the newly revised offer, this will be divided into a binding and non-binding potion
“For the former, IHH is willing to inject 6.41 billion rupees (circa RM380 million) of primary equity without due diligence and immediately acquire two board seats.
“This is subject to IHH being given confirmation to carry out immediate legal and financial due diligence, receipt of applicable approvals from Fortis shareholders and regulators and the end use of the immediate equity infusion to be discussed with IHH’s nominees on the board of Fortis.
“For the non binding portion of the revised proposal, IHH will infuse 33.50 billion rupees (RM1.97 billion) though a subsequent preferential issue and allotment, subject to satisfactory completion of due diligence at a price not exceeding INR175 per share (circa RM10.30 based on the enhanced offer).”