Embattled Fortis picks IHH as new owner
mumbai — Fortis Healthcare’s board of directors chose IHH Healthcare to take control of India’s second-largest hospital chain, ending a months-long takeover battle as the company wrestles with investigations over financial irregularities.
Malaysia-based IHH’s offer would see 40 billion ($583 million) invested directly in the company through a preferential allotment of shares at 170 a share, according to a statement on Friday from Fortis.
After an open offer to shareholders, IHH, one of Asia’s largest healthcare services companies, will own as much as 57 per cent of For- tis. The Indian company rejected a competing proposal backed by private-equity firm TPG.
The price is a 20 per cent premium to Fortis’ closing level on Thursday. Shares of the company jumped as much as four per cent in early trading in Mumbai on Friday to 147.90.
“This is pretty much the best that you’ll get in the circumstances,” said Nitin Agarwal, an IDFC Securities analyst in Mumbai. “It’s a pretty generous offer all things considered, given the challenges that you had.”
A bidding war for cash-strapped Fortis kicked off earlier this year after its founders, brothers Malvinder and Shivinder Singh, lost their shareholding due to debt, and allegations that they had improperly taken funds from the company.
A four-months-long takeover fight drew as many as five potential suitors from as far away as the US and China, all keen to win a prime position in one of the world’s most under-served healthcare markets. The sales process, which often played out in the press with offers and counter offers disclosed publicly, had to be restarted several times amid questions about the board’s independence, which eventually saw all its directors replaced. Even now that it’s won, IHH Healthcare will have its work cut out.
Not only must Fortis’ new owner turn around three straight quarters of losses, it must also deal with the fallout from the conclusions of investigations by government agencies. A report by an outside law firm commissioned by Fortis’s board found about 4.5 billion were loaned amid “systemic lapses”, and were used by the borrowers to ultimately repay money owed to entities with ties to the Singh brothers. —