For­tis picks IHH as its new owner


M alaysia’s

IHH Health­care Bhd is set to take con­trol of India’s For­tis Health­care Ltd af­ter its bid of up to $1.1 bil­lion was cho­sen over a ri­val’s, giv­ing it own­er­ship of over 30 hospi­tals amid a pri­vate health-care boom in India.

IHH’s 170 ru­pees per share of­fer for as much as 57% of For­tis rep­re­sents a roughly 20% pre­mium to its last clos­ing price and caps a months-long bid­ding war for con­trol of the In­dian com­pany that drew in­ter­est from do­mes­tic and in­ter­na­tional suit­ors.

IHH’s of­fer is the third one that cash­strapped For­tis has ap­proved this year, with a pre­vi­ous of­fer be­ing shot down by share­hold­ers. It beat out a joint bid from In­dian firm Ma­ni­pal Health En­ter­prises Ltd and US pri­vate eq­uity firm TPG Cap­i­tal.

Four an­a­lysts told Reuters they ex­pected the deal to fi­nally get share­holder ap­proval.

“It’s a very straight­for­ward deal. Given the prob­lems For­tis has, this is the best they can get at this time,” said Nitin Agar­wal, an an­a­lyst with IDFC Se­cu­ri­ties.

For­tis has strug­gled with a cash crunch, ris­ing debt, and im­age prob­lems.

In­dian reg­u­la­tors are l ook­ing into al­le­ga­tions that its founders took funds from the com­pany. The two founders, who have since left the com­pany, deny wrong­do­ing.

But the com­pany’s as­sets are still con­sid­ered at­trac­tive thanks to ris­ing pri­vate health­care spend­ing in India. Also, the gov­ern­ment aims to ex­pand in­surance to mil­lions of peo­ple in a coun­try that lacks ad­e­quate heath fa­cil­i­ties, ben­e­fit­ing pri­vate hospi­tals such as those run by For­tis.

For­tis said it would call a share­holder’s meet­ing at the ear­li­est to seek ap­proval for the IHH bid.

IHH will pay For­tis 40 bil­lion ru­pees ($585 million) for a 31% stake. Un­der In­dian reg­u­la­tions, IHH will then bid for an­other 26% of For­tis, of­fer­ing up to 33 bil­lion ru­pees.

For­tis said it set­tled on IHH’s “sim­pler” of­fer, which will al­low the In­dian firm to re­fi­nance up to 25 bil­lion ru­pees of debt, and ad­dress its short-term liq­uid­ity needs. Ma­ni­pal had of­fered 21 bil­lion ru­pees at 160 ru­pees per share.

On a con­fer­ence call with the me­dia, For­tis chair­man Ravi Ra­jagopal said he did not ex­pect the com­pany’s cur­rent man­age­ment struc­ture to change af­ter the IHH deal.

Malaysian bro­ker­age PublicIn­vest Re­search said the ac­qui­si­tion was a good step for IHH to ex­pand its foot­print in India at a good price.

“Green­field doesn’t re­ally work in India due to the long bu­reau­cratic process for green­field ac­qui­si­tions,” the bro­ker­age said.

IHH said in a sep­a­rate state­ment it ex­pected the deal to be com­pleted in the fourth quar­ter and did not ex­pect it to have any ma­te­rial ef­fect on prof­its for the fis­cal year end­ing Dec 31.

For­tis had ac­cepted in March a merger of­fer val­ued at 150 bil­lion ru­pees from Ma­ni­pal-TPG, but four other suit­ors soon threw their hats in the ring, es­ca­lat­ing it into a rare bid­ding war.

The com­pany then ap­proved an 18 bil­lion ru­pees in­vest­ment of­fer from a con­sor­tium of two prom­i­nent In­dian busi­ness fam­i­lies.

But with sev­eral share­hold­ers ex­press­ing their dis­plea­sure through the process, For­tis was forced to re-eval­u­ate its ini­tial choice and re-open the bid­ding process.

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