TPG-led group nears deal for control of Fortis Healthcare

A Fortis Healthcare dialysis clinic in New Delhi in 2011. Fortis is discussing issuing around 40 billion rupees (S$808 million) of new stock to TPG and Manipal through a preferential allotment, a source said. That would make the consortium the bigges
A Fortis Healthcare dialysis clinic in New Delhi in 2011. Fortis is discussing issuing around 40 billion rupees (S$808 million) of new stock to TPG and Manipal through a preferential allotment, a source said. That would make the consortium the biggest shareholder in the publicly traded company.PHOTO: BLOOMBERG

Sources say operations of Manipal will be combined with Fortis' under the plan

MUMBAI • A consortium led by TPG is nearing an agreement to gain control of Fortis Healthcare, India's second-largest private hospital chain by market value, people with knowledge of the matter said.

The investor group, which includes Manipal Health Enterprises, could announce a deal in as soon as the next few days, said the people, who asked not to be named.

Under the plan, the operations of closely held Manipal - whose backers include TPG and Temasek Holdings - would be combined with Fortis' business, the people said.

Fortis is discussing issuing around 40 billion rupees (S$808 million) of new stock to TPG and Manipal through a preferential allotment, one of the people said. That would make the consortium the biggest shareholder in the publicly traded company.

The enlarged company will seek to buy out other shareholders of SRL, the medical diagnostics provider that is part-owned by Fortis, according to the people.

The TPG-backed investor group is in negotiations to acquire stakes in SRL from private-equity investors who hold about 30 per cent of the company, one of the people said. A deal could value SRL at 34 billion to 40 billion rupees.

The TPG-led group is seeking control of Fortis as the hospital chain's founders battle allegations of financial irregularities.

India's fraud watchdog and stock regulator are investigating Fortis after Bloomberg News reported that brothers Malvinder Singh and Shivinder Singh took at least 5 billion rupees out of Fortis without board approval.

The situation is fluid, and talks could drag on or break down, the people said.

The TPG consortium is working to structure the transaction in a way that limits its exposure to any legal liabilities of Fortis, the people said.

The deal will be conditional on receiving approval from the Competition Commission of India, according to one of the people.

TPG and Manipal's cash outlay to gain control of Fortis and SRL may total as much as 60 billion rupees, one person said.

Fortis could use the money invested by TPG and Manipal to fund its previously announced purchase of the assets of Singapore-listed RHT Health Trust, which owns some of Fortis' clinics, as well as for debt repayment, the person said.

It could take nearly two years to complete all parts of the multi-step transaction being contemplated.

TPG bought a significant minority stake in Manipal for 9 billion rupees in 2015, the private equity firm said at the time.

Manipal has more than 5,000 operational beds while Fortis has about 10,000 potential beds and 314 diagnostic centres, according to the companies' websites.

Yes Bank has become the biggest shareholder in Fortis after it and other lenders called in shares that had been put up as collateral by Mr Malvinder Singh and Mr Shivinder Singh, said Fortis chief executive officer Bhavdeep Singh on March 1.

Three to four potential buyers have been interested in the hospital operator for a while, he added.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on March 27, 2018, with the headline 'TPG-led group nears deal for control of Fortis Healthcare'. Print Edition | Subscribe