IHH Healthcare: Meet the Highest Bidder of Fortis Healthcare

New Delhi: After months of searching for an investor, cash-strapped Fortis Healthcare said its board unanimously accepted a binding offer from Malaysia's IHH Healthcare Berhad to invest Rs 4,000 crore in it by way of preferential allotment at Rs 170 per share.

On July 3, the company received two binding proposals from IHH and TPG-Manipal consortium but Munjals-Burmans combines, which had earlier become the preferred bidder, and Radiant Life Care had backed out.

In a statement, Fortis said under the accepted offer, IHH would infuse Rs 4,000 crore through subscription to the preferential allotment at a price of Rs 170 per share.

The "proposal provides for refinance of debt to the extent of Rs 2,500 crore", the company said, adding funds infused would be used towards completion of the acquisition of assets of RHT, SRL private equity minority shareholders, and short-term liquidity needs.

A mandatory open offer for public shareholders of Fortis Malar Hospitals Ltd would also be made at a price as determined under Regulation 8 of the SAST Regulations, the company added.

The company said its Board considered merits of both the binding bids and took into account recommendation of its Financial Advisors (Standard Chartered Bank and Arpwood Capital) and the legal advice from Legal Advisors (Luthra & Luthra Law Offices and Cyril Amarchand Mangaldas), in approving IHHs offer.

Commenting on the development, Fortis Healthcare Chairman Ravi Rajagopal said, "The IHH proposal offers a more strategically and financially compelling proposition along with simplicity and certainty."

The process was relaunched on May 29 and has been conducted in a fair, time-bound and transparent manner, he added.

"The release of the Audited FY 2018 financial statements was a key milestone in underpinning the overall success of the transaction," Rajagopal said, adding the board looked "forward to continuing the dialogue with our shareholders ahead of the EGM to approve the transaction".

Fortis said its board chose the offer from IHH after considering all key parameters such as significant primary funds infusion at highest available bid price (Rs 170/share) and sufficient funds commitment for future requirements.

The offer is at 20 percent premium to current market price, it said, adding the IHH proposal offers significant deal certainty given a simpler transaction structure and requirement for fewer approvals and a shorter timeframe.

It also provides an exit opportunity for shareholders through the open offer, in case they desire, Fortis said.

IHH's proposal also offers potential to achieve scale driven synergies on operational and financing front integrates Fortis into a large global healthcare platform with potential synergies, it added.

The newly reconstituted board of Fortis had on May 29 initiated a fresh bidding process to meet FHLs long-term and short-term objectives.

Three bidders (IHH, TPG-Manipal consortium, Hero-Burman consortium) were invited to participate and while Fortis received an expression of interest from Radiant-KKR consortium.

The diligence access and management interaction was offered to all the four bidders, Fortis said.

IHH Healthcare

IHH Healthcare Berhad, is a healthcare group in which Malaysia government’s sovereign wealth fund Khazanah Nasional holds a majority stake. The fund owns a stake in 9 hospitals across India including Global Hospitals, in which it holds a majority stake, under the brand Gleneagles.

Till Last year, IHH Healthcare had a minority stake in Apollo Hospitals. In May, 2017 IHH sold 68.4 lakh equity shares, i.e., 4.78 percent stake, at a price of Rs 1,246.10 per share, a discount of 2.7 percent to closing price of Rs 1,281.60.

IHH had bought stake in Apollo Hospitals in 2011, first purchasing 1.1 crore shares in May and then an additional 40.9 lakh shares in October, the same year. The average cost of acquiring these shares was Rs 480. Almost six years later, the firm has got back more than 2.5 times its investment in the hospital chain. The investment arm had appointed Deutsche Bank as the sole book runner for this stake sale, valued at Rs 838.5 crore.

Read also: Apollo Hospital share price plummet after IHH Exits with Stake Sale at Rs 838 crores

Around the same time, media reports came out that IHH Healthcare had been in advanced talks with the Singh brothers, Malvinder and Shivinder, to acquire a controlling stake in Fortis Healthcare and SRL Diagnostics.

However, in June last year, IHH announced that it is not close to “concluding any negotiations” to buy a controlling stake in Fortis Healthcare.

Read also: IHH Healthcare denies FORTIS stake purchase, shares tank

In April 2018, IHH Healthcare joined the race to acquire India’s troubled Fortis Healthcare, offering to acquire shares at up to Rs 160 apiece, higher than Manipal Health Enterprises’ offer of Rs 155 per unit by valuing the company at Rs 6,061 crore.

Read also: IHH offers Rs 160 per share for Fortis healthcare

However, IHH lost to Munjal-Burmans combine as the Fortis board in May decided by majority to recommend the revised offer of Hero Enterprise Investment Office-Burman Family Office made on May 1 for an upfront equity infusion of Rs 800 crore at a price of Rs 167 per share through preferential allotment, Fortis Healthcare Ltd said in a late-night filing to the BSE.

Read also: Battle For Fortis: Munjal-Burmans emerge Victorious

With objections being raised with the Munjal Burman combine winning, the bids for fortis were invited once again, where IHH made the victory offer of preferrential allotment of Rs 170 per share