Malaysia's IHH Healthcare to invest Rs 4000 cr in Fortis

Henrietta Strickland
July 16, 2018

The allotment will take place at Rs 170 a share, which is at a 20 percent premium to Fortis' current market price.

IHH will make the acquisition through a combination of primary equity infusion and secondary purchase from public shareholders of Fortis Healthcare at an offer price of Rs170 per share.

This was pursuant to both the SSA and open offer to Fortis shareholders, which could see IHH hold about 432.32 million Fortis shares, representing about 57.1% stake of the expanded voting share capital of Fortis, thereby acquiring control of Fortis. However, this time there is more confidence of the deal being approved.

Fortis shares rose only 4 percent to 147.90 rupees on Friday, which analysts attributed to IHH's win and offer price coming in as expected.

"It's a very straightforward deal. We wish them and the entire Fortis family the very best", they added.

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

A report by an outside law firm commissioned by Fortis's board found about 4.5 billion rupees was improperly loaned to intermediary companies, which ultimately used the funds to benefit entities linked to the Singhs. The duo, who have since left the company, denies wrongdoing.

Cash-strapped Fortis operates about 30 private hospitals in India, where the race to cash in on a private healthcare boom is heating up.

Reasoning out the factors that led to selection of IHH over MHE-TPG, Fortis Healthcare's Board stated that the bid price is not only highest but also "offers significant deal certainty given a simpler transaction structure and requirement for fewer approvals and a shorter timeframe" apart from providing exit opportunity for shareholders through the open offer.

Fortis Healthcare Ltd, which has a turnover of Rs 40,000 crore, had accepted a Rs 1,800-crore offer by the Munjal-Burman combine in May. Manipal had offered Rs 21 billion at Rs 160 per share.

Fortis Healthcare Chairman Ravi Rajagopal said, "The IHH proposal offers a more strategically and financially compelling proposition along with simplicity and certainty". A four-months-long takeover fight drew as many as five potential suitors from as far away as the US and China, all keen to win a prime position in one of the world's most under-served health-care markets.

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

Trading in the shares of IHH Healthcare Bhd was halted as of 9.22am today.

"In our view, our own offer for Fortis reflected a comprehensive analysis of the risk and reward of the business", Pai said.

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.

Other reports by Click Lancashire

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