India's Fortis accepts IHH Healthcare's RM2.34b offer

Cash-strapped Fortis said IHH will invest 40 billion Indian rupees ($584.11 million) at 170 rupees per share.

Cash-strapped Fortis said IHH will invest 40 billion Indian rupees ($584.11 million) at 170 rupees per share.

KUALA LUMPUR: India's Fortis Healthcare Ltd has accepted the investment offer from IHH Healthcare Bhd to acquire a 31.1% stake for RM2.348bil, emerging as the winner in a months long war against international and domestic bidders.

IHH announced to Bursa Malaysia on Friday its unit Northern TK Venture Pte Ltd had inked a share subscription agreement with Fortis – which operates about 30 private hospitals in India – to subscribe to 235.294 million new Fortis shares at 170 rupees each or RM9.98 per share. 

IHH said this values Fortis at approximately RM5.214bil.

The bidders which IHH had beaten for the Fortis stake included Hero-Burman group, a consortium of Manipal Health Enterprises and private equity firm TPG and Radiant Life Care Private Ltd. 
IHH said the preferential allotment for the 31.1% stake will trigger a mandatory cash open offer for 197.025 million shares or a 26% equity interest in Fortis at an offer price of 170 rupees per share 

On completion, this will subsequently trigger mandatory cash open offer for 26% equity interest in Fortis Malar Hospital at an offer price of The offer is at 58 rupees or RM3.40 a share, valuing Fortis Malar at approximately RM64mil.

“Depending on the acceptance levels for the Fortis open offer and Malar open offer, the total funding required for the transaction will be between 40bil rupees (RM2.348bil) and 74bil rupees (RM4.331bil, which will be funded through existing cash reserves and debt facilities,” it said. 

IHH said the transformational transaction gives it a controlling interest in leading healthcare services provider in India, one of the fastest growing markets driven by sustainable megatrends.

To recap, the board of Fortis had on May 11 accepted the joint offer from the Hero-Burman group despite its offer of 18 billion rupees (US$265mil) being lower than the other bidders – IHH and Manipal Hospitals Enterprises.

This led to a lukewarm response from shareholders who voted out a director, while three other directors had resigned ahead of the vote, triggering the new bidding process.

In Friday's development, IHH said the subscription price was based on the historical and prevailing market price of Fortis shares; expected cash flows of Fortis; earnings potential and growth prospects of Fortis and the rationale of the proposals and prospect of the Indian healthcare industry.

IHH said pursuant to the proposed subscription of the new shares and open offer being accepted, it will hold 432.319 million shares or 57.1%.

“The proposals represent an opportunity for IHH to further expand its growth footprint in India, given India’s tremendous growth potential with the rising demand for quality private healthcare. 

“The proposals are expected to propel IHH to become a leading Pan-Indian hospital operator, operating more than 5,400 beds in 37 hospitals,” IHH said. 

India is IHH’s fourth home market after successful re-calibration of IHH’s growth strategy in India to focus on inorganic growth. 

Corporate News , M&A