In a marathon meeting that went on for hours, the Fortis Healthcare Limited (FHL) board on Thursday met to decide who'll take charge of the cash-strapped largest hospital chain in country. Having played the belle of the ball over the past few weeks, with multiple suitors aggressively competing against, the company finally decided to take the offer from Sunil Kant Munjal of Hero Enterprise and the Burman family of the Dabur group.
"The Board, post having the detailed discussions on the pros and cons of each offer, decided by majority, to recommend the offer of Hero Enterprise Investment Office-Burman Family Office (i.e. the last offer made on May 1, 2018) for an upfront equity infusion of Rs. 800 Crore at a price of Rs. 167/share or SEBI (Issue of Capital and Disclosure Requirements) ("SEBI ICDR") Pricing Guidelines, whichever is higher, into the Company through preferential allotment and a further amount of INR 1000 crores through preferential issue of warrants (of which Rs. 250 Crore will be upfront being an amount equivalent to 25% of the consideration of warrants) at a price of Rs. 176/share or SEBI ICDR Pricing Guidelines, whichever is higher, to the shareholders for approval," Fortis said in a regulatory filing.
The Fortis board of directors has also appointed Sabina Vaisoha and Rohit Bhasin as independent directors of the company for a period of five years, the filing further said.
Apart from bids submitted by the Munjal-Burman combine, the FHL board had binding bids from three more competitors - Manipal-TPG, IHH Berhad, and KKR-backed Radiant Life Care - to choose from. Recently, in a letter to the shareholders, the four directors currently in the line of fire, said that the board decided to consider only binding bids as "the non-binding bids involve considerable uncertainty and merely running a due diligence process does not guarantee a binding bid, which the board had wanted in the best interest of the company". They had added that "considering the need for a certain and quick solution for the company, it was considered prudent that only binding bids should be considered".
Here's a recap of all the offers made to Fortis Healthcare.
Munjals-Burmans: On May 1, the Munjal-Burman combine presented the FHL board with a "revised investment proposal" to invest Rs 1,800 crore directly, without any due diligence. Its previous offer proposed a direct infusion of Rs 1,500 crore, so the new deal is significantly sweeter. Of the proposed investment amount, Rs 800 crore will be invested through preferential issue of equity shares and the balance through preferential issue of warrants, based on FHL's current business and financial position. The offer letter also proposed a strategic sale of the SRL Diagnostics unit after divesting FHL's stake in it.
Manipal-TGP: The revised offer made last Sunday valued FHL at Rs 8,358 crore, or Rs 160 per share. The consortium will be investing around Rs 3,300 crore in the deal for FHL, of which Rs 2,100 crore will be invested in the company and Rs 1,200 crore will be used to buy the 30.93 per cent stake held by private equity firms in SRL Diagnostics. Also, as per the terms of the latest offer, Manipal Hospitals will merge with FHL, as against the earlier proposal to demerge Fortis' hospitals business and merge it with Manipal Hospitals.
IHH Healthcare Berhad: The same day, the Malaysian hospital chain also upped its offer for FHL by 9 per cent. The "Enhanced Revised Proposal" offered an immediate equity infusion of Rs 650 crore at a valuation of Rs 175 a share, up from its previous offer at Rs 160 per share, along with a subsequent equity infusion of Rs 3,350 crore subject to satisfactory completion of the due diligence process. Yesterday, IHH submitted a clarification to the FHL board saying that the due diligence exercise shall only result in a 'go' or 'no-go' outcome, as the case may be, where the subsequent equity infusion is concerned. "The due diligence is not intended to be a price adjustment mechanism for the subsequent equity infusion," it added.KKR-backed Radiant Life Care: This offer letter proposed a binding offer to purchase the Fortis hospital in Mulund, Mumbai, "without due diligence and as a going concern at an enterprise valuation of Rs 1,200 crore as the first step". The second part of the offer - non-binding at this stage and subject to due diligence - proposed spinning off SRL Diagnostics "for the time being so that FHL can run an independent competitive sale process". Radiant further proposed a demerger of the hospitals business from FHL into a new company followed by an all-cash open offer to shareholders of the new entity at a price of Rs 126 per share. The offer is subject to Radiant being able to acquire 26 per cent or more shares of the new company. "In order to fund RHT stake acquisition, we propose a rights issue offer by NewCo [new entity]. The entire rights offer amount would be back-stopped by Radiant," the offer letter added.
With PTI inputs