The world's largest healthcare group by market capitalisation, IHH Healthcare Berhad, has emerged as the winner in the race to acquire India's second largest healthcare network Fortis Healthcare Ltd (FHL) by outbidding the other contender, TPG-Manipal combine. IHH will invest Rs 40 billion at Rs 170 per share through preferential allotment of shares, FHL said in an early morning statement on Friday.
The four-month-long bidding war for Fortis has seen interest from both domestic and international suitors. IHH's offer is at a 19.5 per cent premium to FHL's closing price on Thursday on the bourses. Northern TK Venture Pte Ltd, Singapore, a unit of IHH, will be issued 235.3 million new shares of FHL through a preferential allotment that would give a roughly 31 per cent of the company's total voting equity share capital.
IHH will make a mandatory open offer to shareholders for 26 per cent of the outstanding shares post-issuance. This will take IHH's shareholding in the company up to as much as 57 per cent.
The transaction is subject to shareholder and Competition Commission of India (CCI) approval.
Fortis said that the proposal provides for refinancing of debt to the extent of Rs 25 billion. Funds infused would be used towards completion of the acquisition of the assets of RHT (that owns some of Fortis hospitals' assets) and also buy out the stake of PE investors in SRL, as well as to address short-term liquidity needs.
A mandatory open offer for public shareholders of Fortis Malar Hospitals would be made at a price determined under Regulation 8 of the SAST Regulations, the company added.
Fortis Healthcare Chairman Ravi Rajagopal said, "The IHH proposal offers a more strategically and financially compelling proposition along with simplicity and certainty." The company said that the board chose the offer considering all key parameters like significant primary funds infusion at the highest available bid price and sufficient funds commitment for future requirements.
Two other suitors -- Hero Enterprises-Burmans and Radiant Enterprises -- backed out of the race in the last leg.
According to the bid conditions, suitors had to make a minimum investment of Rs 15 billion and provide an exit to institutional investors.
IHH, which entered India in 2002, has taken an organic route to growth and the potential acquisition would allow it to expand its footprint across the country. Fortis is the second-largest healthcare chain in the country and has 45 healthcare facilities and 300 diagnostic centres under its belt.
Last week, IHH Healthcare's Managing Director, Tan See Leng, told journalists in Malaysia that a successful bid for Fortis would be a springboard for IHH's plans in India and the acquisition would transform the company's entire India landscape. Currently, it runs seven hospitals in South and West India with 1,600 beds. Its Indian business contributed Rs 12 billion, which was around six per cent of the total, in revenue in 2017.
Deal in a nutshell