Day after TPG and Manipal sweeten Fortis offer, IHH plans fresh bid

Mumbai: A day after the TPG-Manipal Group sweetened its bid for Fortis Healthcare Ltd’s hospital assets, IHH Healthcare Bhd is preparing to formally approach the hospital operator with an offer, Bloomberg reported, citing people it didn’t identify.

Kuala Lumpur-based IHH, which is contemplating a cash offer for Fortis, plans to send a letter to the hospital operator’s board within the next couple of weeks with its bid details, the news agency reported.

IHH’s offer would compete with the Manipal Group’s revised bid, which was raised on Tuesday after some large shareholders of Fortis said the earlier offer had undervalued the hospital assets.

Manipal’s revised offer pegged Fortis hospitals’ equity valuation at Rs6,061 crore (Rs116 per share)—an upward revision of about 21% from the previous offer, Manipal Group chairman Ranjan Pai said in an interview. The revised offer values Fortis Healthcare at Rs155 per share.

Fortis Healthcare will separate its hospital assets and merge it with Manipal Hospitals and create a combined hospital business that will be a publicly traded company. This will be followed by a rights issue of Rs4,000 crore to support the proposed acquisition of hospital assets owned by RHT Health Trust. This will provide an opportunity to Fortis Healthcare shareholders to participate on an equal basis with Manipal Group and TPG Capital to fund the capital needs of the combined hospital business.

TPG-Manipal had announced their first offer for Fortis Healthcare on 27 March.

“We waited for three-four days to get all the feedback and then the following week started getting phone calls and met a few people face to face. We spoke to most of the major shareholders. The investors told us that they like the logic of merger of Manipal and Fortis, they like Manipal as a promoter and that they like TPG as an investor,” said Pai.

According to Pai, the major concern for Fortis shareholders revolved around the issues of the structure of the deal and the pricing.  “Investors told us that what they don’t like about the deal is the structure and the price. Their third point was you are putting too much of money at this value, which is a depressed value, you should either put less money or allow us to participate. We have taken all those three points and we have addressed that,” he said.

On 2 April, Mint reported that some shareholders of Fortis Healthcare had come together to oppose the deal. These investors, led by India-focused hedge fund Eastbridge Capital, have approached several other shareholders of Fortis, including activist hedge fund Elliott Management Corp. and a mutual fund with a large shareholding, to oppose the deal, the report said.

Billionaire Rakesh Jhunjunwala, an investor in Fortis Healthcare, too had questioned the deal between Manipal-TPG Capital and Fortis Healthcare, The Economic Times reported on 4 April.

Pai added that while the revised offer was announced just a day ago and the early signals from some investors has been ‘neutral to positive’.

“This is our first foray in the public markets and we don’t want to enter with so many unhappy shareholders. We want to carry all these people down the road and we believe in having a long-term relation with them. The revised offer was a combination of all these things,” he said. livemint


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