IHH faces strong competition for Fortis
PETALING JAYA: While IHH Healthcare Bhd stands out among suitors of Fortis Healthcare Ltd with its clear proposal of focusing on financial needs, three other parties have a local edge over IHH in terms of experience and work in the domestic Indian region.
PublicInvest Research noted that the local edge provides these competitors with greater influence and rapport in the industry in their bid to take over the hospital chain.
Fortis has received as many as five offers for control of its private hospital business - a binding bid from rival hospital operator Manipal Healthcare Enterprises Pvt Ltd, a binding investment offer from a consortium of two prominent Indian business families - Hero Enterprise Investment Office and Burman Family Office (Hero-Burmans) – as well as offers from China’s Fosun International and Radiant Life Care Private Ltd.
“If Fortis is more interested in locking in a demerger of its business, then Manipal and Radiant’s offers would be deemed more attractive instead.
“Manipal probably has the upper hand, being the third-largest hospital chain in India, and having the size to complement Fortis’ business,” it said in a note.
The research house noted that Radiant, on the other hand, would stand out due to its plan to buy one of Fortis’ hospitals, implying an immediate liquidity of about 6.8 billion rupees without equity dilution for Fortis’ shareholders.
This, it said, could weigh into Fortis’ decision, as it was looking to secure a deal as soon as possible.
The research house added that it remained confident of IHH’s deep experience in improving profitability of hospitals through strategic decisions in enhancing revenue and cost management, based on its track record.
It has maintained its earnings estimates and neutral call on the group.
On Tuesday, IHH announced that it had issued a revised proposal to buy a stake in Fortis with a binding offer.
The group told Bursa Malaysia that it had sent a letter to Fortis offering an immediate capital injection of 6.5 billion rupees (RM382.63mil) for preferential shares at 160 rupees a share and the right to appoint two directors.
The equity infusion, IHH said, was subject to confirmation by Fortis that IHH would be given immediate access to carry out a legal and financial due diligence, as well as approvals from shareholders and regulators. It also said the funds to be injected are to be used for the payment of immediate dues to employees, creditors and to ease debts.
Subsequently, IHH is proposing a non-binding proposal to infuse up to 33.5 billion rupees (RM1.97bil), subject to the satisfactory completion of the due diligence.