Fortis deal: IHH likely to appear as winner with Rs 4,700-5,400 crore bid

Mumbai: Malaysia's IHH Healthcare Berhad is likely to appear as the highest bidder of the latest Fortis Healthcare Bid with the controlling stake of cash-strapped Fortis healthcare expected to be acquired by IHH Healthcare for Rs 4,700-5,400 crore, according to a recent media reports.

Medical Dialogues had earlier reported that Fortis had received only two binding bids, from Malaysia's IHH Healthcare Berhad and TPG-backed Manipal Health Enterprises Ltd.

Mint has now reported that IHH has bid a higher per share offer than the only contender Manipal-TPG combine for Fortis and also has offered to acquire non-promoter shareholders of Fortis to the agreed purchase price at 10-15 percent premium.

A person knowing about the matter told Mint, “The IHH Healthcare offer is higher than Manipal’s offer. But above all, IHH has agreed to make an open offer at a premium to the average market price (weighted average market price for 60 trading days preceding the announcement) as well as the price offered to the promoters.”

“Additionally, the plan given by IHH Healthcare for the acquisition of RHT Health Trust (a Singapore-listed business trust that owns some of Fortis’s assets) is somewhat better than Manipal’s offer,” he added.

Mint reports that IHH Healthcare will first buy around 25 percent in Fortis through a mix of direct acquisition and preferential allotment. This will cost around Rs 2,200-2,400 crore. After that, IHH will make an open offer to buy at least an additional 26 percent in Fortis, which will involve an investment of about Rs 2,500-3,000 crore, according to the latest offer.

The daily further reported that IHH has also readied an acquisition plan for RHT Health Trust separately through a secondary infusion and is ready to disclose the source of its funding to avoid further controversies.

Responding a query sent by Mint, IHH said, “We believe our bid best addresses the short-term liquidity needs and long-term strategic requirements of Fortis. We look forward to a decision by the Fortis board and will make an announcement if there are any material developments.”

A spokesperson for Fortis said, “as stated in the exchange filing, the board is in the process of finalizing the bids.”

It has been reported that TPG-Manipal has offered to infuse Rs 2,100 crore in cash into Fortis which will be used to buy out RHT Holdings, that is valued at Rs 4,600 crore.

29 percent stake of RHT is being held by Fortis. By keeping Fortis’s stake in RHT and a debt of around Rs 1,000 crore on its books, RHT’s actual valuation comes to between Rs 2,200 crore and Rs 2,500 crore.

“TPG-Manipal will pay cash and borrow a bit of money to clear RHT,” said a third person with direct knowledge of the TPG-Manipal offer, requesting not to be named.

Earlier infusion of Rs 2,100 crore through a preferential allotment at Rs 180 a share had been proposed by Manipal-TPG which would allow it to own 18.4 percent in Fortis at a valuation of Rs 9,403 crore. It also plans to buy out Fortis unit SRL Diagnostics’s PE investors for Rs 1,113.4 crore, the person said.

Speaking with Mint, a third person said that TPG-Manipal is also in talks with a couple of large pension funds to give an exit to some of the existing institutional shareholders such as East Bridge, and Yes Bank.

“We have given a proposal that makes logical sense. It is a tough call for the board. We will be fine with the decision that the board takes,” Ranjan Pai, chairman of Manipal told Mint.

The newly constituted Fortis board had set tough conditions for the potential bidders. The contender will have to make a minimum investment of Rs 1,500 crore in Fortis Healthcare by way of a preferential allotment, apart from having a plan for funding the acquisition of RHT Health Trust and one for providing exits to non-promoter shareholders. The bidders will also have to disclose their source of funding.