IHH to ac­quire 31% stake in For­tis for ₹4,000 crore

The firm pipped Ma­ni­pal­tpg com­bine’s ₹2,100 crore of­fer

Hindustan Times ST (Mumbai) - - HTNATION - Anirudh Laskar

NEW DELHI: Malaysian-sin­ga­porean pri­vate health­care group IHH Health­care Ber­had is set to ac­quire con­trol of For­tis Health­care Ltd af­ter be­ing named on Fri­day as the pre­ferred bid­der to take over the trou­bled hospi­tal op­er­a­tor, In­dia’s sec­ond largest.

The For­tis board unan­i­mously ac­cepted a bind­ing of­fer made by IHH, through its wholly owned sub­sidiary North­ern TK Ven­ture Pte. Ltd, to in­vest ₹4,000 crore by way of pref­er­en­tial al­lot­ment at an of­fer price of ₹170 per share, For­tis said.

IHH’S ri­val bid­der Tpg-ma­ni­pal had made an of­fer of an in­vest­ment of ₹2,100 crore at a price per share of ₹160, For­tis said.

IHH Health­care is the world’s sec­ond largest health­care group by mar­ket cap­i­tal­i­sa­tion, op­er­at­ing 49 hos­pi­tals in nine coun­tries.

For­tis, which runs 34 hos­pi­tals in In­dia and abroad, has been at the cen­tre of a pro­tracted bid­ding war amid an of­fi­cial in­ves­ti­ga­tion into al­le­ga­tions of ir­reg­u­lar­i­ties against founders Malvin­der and Shivin­der Singh, both of whom deny any wrong­do­ing.

On 9 July, Mint first re­ported that IHH Health­care is likely to ac­quire con­trol of For­tis Health­care Ltd with a bind­ing of­fer to buy at least 51% in the cash­strapped hospi­tal op­er­a­tor.

On Fri­day, IHH said that upon com­ple­tion of the ac­qui­si­tion, it will hold a min­i­mum of 31.1% and a max­i­mum of 57.1% eq­uity in­ter­est in For­tis Health­care.

For this, IHH will in­vest ₹4,000-7,400 crore in newly is­sued For­tis Health­care shares. This will in­fuse eq­uity in For­tis, help in the ac­qui­si­tion of RHT Health Trust, a Sin­ga­pore sub­sidiary of For­tis, and pro­vide an exit to pri­vate eq­uity in­vestors of SRL,A health­care and pathol­ogy lab op­er­a­tor in which For­tis Health­care own 56%.

It will then in­vest an­other ₹3,300 crore as manda­tory of­fer in the form a cash exit op­tion to 26% of share­hold­ers, again at a price of ₹170 per share.

As an ac­qui­si­tion of con­trol in For­tis Health­care will au­to­mat­i­cally change the con­trol of For­tis Malar Hospi­tal Ltd, a sub­sidiary of For­tis Health­care, IHH will make a sep­a­rate cash open of­fer to ac­quire 26% eq­uity in­ter­est in For­tis Malar Hospi­tal Ltd. The open of­fer for For­tis Malar, a multi super-spe­cialty cor­po­rate hospi­tal in Chennai, is at ₹58 per share, valu­ing the com­pany at ₹109.2 crore.

“This win-win com­bi­na­tion will make IHH the lead­ing health­care ser­vices provider in In­dia, while giv­ing For­tis Health­care and its stake­hold­ers cer­tainty and clar­ity on the fu­ture of the group,” Dr Tan See Leng, man­ag­ing di­rec­tor and CEO of IHH, said.

“With a clear and holis­tic strat­egy in place, we have de­vel­oped a 100-day turn­around plan to sta­bilise For­tis Health­care, which will pave the way for For­tis Health­care to re­alise its full po­ten­tial in the long run.”

The ac­qui­si­tion val­ues For­tis Health­care at ₹8,880 crore, with the of­fer price of ₹170 apiece, rep­re­sent­ing a 22.3 times mul­ti­ple of For­tis Health­care’s earn­ings be­fore tax for the 12 months ended 31 March 2018, and 19.5% and 15.3% pre­mium to the clos­ing share price on 12 July 2018 and 60-day vol­ume weighted av­er­age price, re­spec­tively.

“De­pend­ing on the ac­cep­tance lev­els for the For­tis Open Of­fer and Malar Open Of­fer, the to­tal fund­ing re­quired for the trans­ac­tion will be be­tween ₹4,000 crore and ₹7,400 crore, which will be funded through ex­ist­ing cash re­serves and debt fa­cil­i­ties,” said the re­lease.

Bhavdeep Singh, CEO of For­tis said, the bid by IHH of­fered more “cer­tainty and sim­plic­ity”, adding that there is not much risk of IHH pulling out of the deal.

“The board has fol­lowed the due process. Equally im­por­tant it has been trans­par­ent through­out. Which is why the out­come has been wel­comed by in­vestors,” said Amit Tan­don, founder and CEO of proxy ad­vi­sory firm In­sti­tu­tional In­vestors Ad­vi­sory Ser­vices.

The ac­qui­si­tion will ex­pand IHH’S foot­print in In­dia. For­tis Health­care op­er­ates a net­work of 34 hos­pi­tals across In­dia and in­ter­na­tion­ally with a ca­pac­ity of over 4,600 beds, em­ploy­ing more than 2,600 doc­tors and 13,200 sup­port staff who catered to 26 lakh pa­tients in FY2018.

“IHH is also sup­port­ive of For­tis Health­care’s an­nounced plan to ac­quire RHT Health Trust, which is listed in Sin­ga­pore and cur­rently has a port­fo­lio of 12 clin­i­cal es­tab­lish­ments, four green­field clin­i­cal es­tab­lish­ments and two op­er­at­ing hos­pi­tals,” said the re­lease.

The For­tis open of­fer is ex­pected to com­mence in Au­gust or Septem­ber 2018 sub­ject to cer­tain con­di­tions, in­clud­ing reg­u­la­tory ap­provals from the Com­pe­ti­tion Com­mis­sion of In­dia, Se­cu­ri­ties and Ex­change Board of In­dia and the Re­serve Bank of In­dia, and close by the third quar­ter of 2018.

Cit­i­group Global Mar­kets In­dia Pvt Ltd, Deutsche Bank Group, HDFC Bank Ltd and HSBC Bank are act­ing as fi­nan­cial ad­vi­sors and joint man­agers to the open of­fers for IHH.

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