SINGAPORE - Units in RHT Health Trust surged 10.5 per cent to S$0.895 on Wednesday (Nov 15) following an offer by its controlling shareholder Fortis Healthcare to buy its entire asset portfolio for 46.5 billion Indian rupees (S$964 million).
Nomura estimates that the offer price translates to a unit cost of about S$0.90 to S$0.91 per share - although it is the portfolio that is for sale rather than the trust. Analysts generally agreed that the price was fair.
Fortis' offer represents an 11 per cent premium over the business trust's closing share price on Tuesday, and a 7.8 per cent premium over the latest reported net asset value of S$0.835 per share.
The manager of RHT has entered into a term sheet with Fortis which includes a 60-day period for exclusive negotiation. Fortis has indicated that the proposed acquisition will take about six to nine months to complete.
RHT Health Trust has interests in 12 clinical establishments, four greenfield clinical establishments and two operating hospitals in India. Its manager has appointed Merrill Lynch (Singapore) to advise on the proposed disposal.
Fortis, a large integrated healthcare delivery service provider in India, currently holds an indirect interest of about 29.76 per cent of units in RHT.
In a briefing with analysts, the manager of the trust said that it believes that the deal is compelling because the trust has yielded 65 per cent in total shareholder return, including five years of dividends, since it listed in 2012.
The manager said the proposed acquisition also addresses investors' concern over the future growth potential of RHT Health Trust's portfolio. Given the low liquidity of the stock, it also presents a good exit opportunity for investors.
From Fortis' standpoint, the group believes that the proposed transaction will make it easier for investors to understand its business and financial performance.
Fortis plans to pay the consideration using a combination of equity, quasi-equity and/or debt. It said that it has an enabling resolution in place to raise capital for up to 50 billion rupees and has been in active dialogue with financial and strategic investors to raise funds. It is supported by Standard Chartered Bank as its financial advisor.
RHT Health Trust's trustee-manager said the net proceeds are intended to be substantially distributed to unit holders.
The trust late on Tuesday posted a 15.5 per cent drop in its distribution per unit to 1.14 Singapore cents for the three months ended Sept 30, due to higher costs from refinancing related activities and increased interest costs.
Total revenue rose 4.9 per cent to S$23.9 million, contributed by the contractual annual increase in base fee payable by its operator Fortis Healthcare, while net service fee and hospital income rose 6.4 per cent to S$13.4 million.
Fortis ended the day at 140.9 rupees on the National Stock Exchange of India, up 8 per cent as more than 19 million shares changed hands.