China’s Fosun becomes fourth suitor for Fortis
ACQUISITION BID Firm offers to invest up to $350 million in the hospital chain BENGALURU/MUMBAI:
Cashstrapped Fortis Healthcare Ltd said Fosun International Ltd has offered to invest up to $350 million, making the Chinese firm the fourth suitor aiming to tap soaring demand for private healthcare in India.
The unsolicited non-binding offer follows one other offer of investment from local businesses and separate takeover bids from unlisted Manipal Health Enterprises Ltd and Malaysia’s IHH Healthcare Bhd.
Interest in Fortis comes as the government works to provide health insurance for about half of India’s 1.3 billion population, which analysts expect will enable more people to use private healthcare services.
Fortis runs about 30 hospitals, having grown rapidly with demand created by a stretched public healthcare system. But it has lately struggled with insufficient cash and increased debt, while regulators investigate allegations that its founders took funds without board approval. The founders, who have since left the company, deny wrongdoing.
“Fortis has always been attractive since it has huge capacity. That’s the simple logic: a ready asset with 5000-plus, beds and a proper brand,” said a Mumbai-based analyst who declined to be identified. Also, Fortis has no credible promoter since the founders quit and that makes the firm vulnerable, the analyst said.
In a regulatory filing late on Tuesday, Fortis said it had received a letter from Fosun in which the Chinese conglomerate offered up to ₹156 per Fortis share in return for less than a quarter of the firm.
Fosun is one of China’s most acquisitive companies. Last month it said it aimed to increase investment in India, and last year announced it would buy threequarters of India’s Gland Pharma.
A Fosun spokesman said the conglomerate could not provide further comment at present.
“We are aware of the company’s near-term cash requirements, strategic plans for consolidation of its real estate assets, and various alternative proposals put forth to the board’s consideration,” Fosun said in the letter.
The letter showed Fosun also offered a cash infusion of ₹100 crore ($15.21 million) within the next 45 days, including the option of immediately subscribing to Fortis’ convertible bonds, provided Fortis grants 30 days of exclusivity to negotiate the investment proposal.
Fosun said its proposal will best meet Fortis’ immediate short- and long-term needs, and that the Chinese firm did not expect to make significant changes to Fortis’ senior management, according to the letter.
Last month, Fortis reported a net loss for the half-year through December following the closure of one hospital. Its debt stood at ₹1,339 crore and its net debt-to-equity ratio was 0.22.
The firm has lost over a third of its market value since its shares peaked in May, after authorities began investigating founder brothers Malvinder and Shivinder Singh for alleged unauthorised use of funds.
The pair resigned from Fortis’ board in February following unrelated legal troubles involving the sale of their stake in drugmaker Ranbaxy to Japan’s Daiichi Sankyo Co Ltd.
Fortis stock is nevertheless trading at 484 times forward earnings, compared with 72 times for Apollo Hospitals Enterprise Ltd, indicating investors believe the firm has significant earnings potential.