'IHH HAS TAKEN A CALCULATED RISK WITH FORTIS'
IHH Healthcare Bhd, which runs hospitals across Malaysia, Singapore, Turkey and India, has been pursuing acquisition of Fortis Healthcare for nearly 18 months. The Malaysian group lost out in earlier bids, but bagged the asset after a long-drawn bidding war. DR TAN SEE LENG, IHH's group chief executive officer, spells out the company's plans to Aneesh Phadnis. Edited excerpts:
Why is the price offered by IHH now, ~170 a share, lower than the last bid?
We have looked at Fortis Healthcare's audited financial statements. We have taken into account the findings of the due diligence. We thought this was a fair price. Also, we are answerable to our shareholders.
You have said IHH has a 100-day revival plan for Fortis Healthcare? What is it?
The most urgent and pressing issue is to stabilise and secure the asset. Of our ~40 billion investment, ~26.5 billion will go towards acquisition of assets of RHT and another ~13.50 billion will be used as working capital, capital expenditure and upgrade. With this funding in place, we can focus on acquiring doctors and improving operations at each of the hospitals.
Is there anything more in the 100day plan?
We can look at identifying and evaluating some of the related party transactions. We can also look at how we can leverage our banking relationships to optimise debt funding costs of Fortis, We can potentially look at savings of 2-4 per cent in financing costs. We are looking at bringing the company back to what it was before. Now, Fortis' margins trail its competitors' -in hospital as well as lab space.
What does the Fortis win mean to you? Are you not worried of all the Fortis controversies?
We are very excited. Our journey has only begun. We have detailed plans and laid out milestones and yardsticks. We know there is risk. Once we get into the asset, there will be more things we will uncover. I am pretty sure of it. But given the length of time and discipline we have put for due diligence, we mitigated a large part of it. With the new board in place, transparency in bidding process, and disclosures that have been placed, we have taken a calculated risk. We are confident of turning around the asset.
Fortis brand is under litigation how do you look at it ? Do you plan to rebrand it?
To the extent that is possible, we will use Fortis brands. We need to fulfill certain licensing requirements. I guess we will cobrand it with Gleneagles. We have Gleneagles that is a global brand and it (brand ownership issue of Fortis) is not a major worry for us.
Are you confident of support from institutional shareholders?
Our investment proposal is simple and easy to understand. It can be executed in a short time, which is a critical issue. We are in dialogue with stakeholders and shareholders in Fortis.
IHH considers India as a home market. What is your growth plan in India?
India's vast clinical talent is a resource and can serve as a launch pad for medical tourism. We believe we can organise Fortis Hospital into a centre of excellence, a one-stop multidisciplinary type of set up that offers comprehensive treatment.