IHH wins long bidding war for India's Fortis

Fortis Healthcare is India's second-largest private hospital chain. The bidding war for it began earlier this year after Fortis founders Malvinder and Shivinder Singh lost their shareholding owing to debt and allegations that they had improperly take
Fortis Healthcare is India's second-largest private hospital chain. The bidding war for it began earlier this year after Fortis founders Malvinder and Shivinder Singh lost their shareholding owing to debt and allegations that they had improperly taken funds from the company.PHOTO: REUTERS

It could spend over $1.47b for majority stake through a subscription and general offer

Singapore-listed IHH Healthcare has won the lengthy bidding war for cash-strapped Fortis Healthcare, India's second-largest private hospital chain.

IHH told the Singapore Exchange yesterday that it could spend more than 73.5 billion rupees (S$1.47 billion) to acquire a majority stake in Fortis through a subscription and general offer.

A unit of the Malaysia-based firm has agreed to subscribe for 235.3 million new Fortis shares, or a 31.1 per cent stake of the enlarged share capital, for 40 billion rupees through a preferential allotment.

The offer price of 170 rupees a share is a 19.5 per cent premium to Fortis' closing price on Thursday.

The deal also involves IHH making an open offer to acquire an additional 26 per cent interest for at least 170 rupees a share, or about 33.5 billion rupees in total. In addition, IHH will offer to buy up to a 26 per cent stake in Fortis-listed subsidiary Fortis Malar Hospitals, an operator of clinics and hospitals, for 48.9 million rupees, or 10 rupees a share.

The buyout will make IHH a leading healthcare operator in India, with more than 5,400 beds in 37 hospitals, it said in the exchange filing.

"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," it said.

The buyout will make IHH a leading healthcare operator in India, with more than 5,400 beds in 37 hospitals, it said in the exchange filing.

IHH operated 1,600 beds across six hospitals and three medical centres in India as of March 31. It has hospitals throughout Malaysia, Singapore, India, China, Brunei and the United Arab Emirates, as well as integrated healthcare services across 21 hospitals in Turkey, Bulgaria, Macedonia and Iraq under a 60 per cent-owned unit.

"Accordingly, IHH does not foresee any material change to the risk profile of the IHH Group's businesses as a result of the proposals as the IHH Group is already exposed to the inherent risks in the premium healthcare provider industry," it said.

IHH said the deal will likely be completed in the fourth quarter. It does not expect it to have any material effect on earnings for the financial year ending Dec 31.

The bidding war for the firm began earlier this year after Fortis founders, brothers Malvinder and Shivinder Singh, lost their shareholding due to debt and allegations that they had improperly taken funds from the company.

IHH beat three other players in the takeover battle: Hero Enterprise Investment Office and the Burman Family Office consortium; a consortium of Manipal Health Enterprises and private equity firm TPG; and KKR-backed Radiant Life Care.

"There is no doubt that the last 12 months have been challenging for us," Fortis chief executive Bhavdeep Singh said in the statement. "However, I am confident we can collectively re-energise the entire organisation."

The Fortis board had accepted a proposed 18 billion rupee offer in May from the Hero-Burman consortium following a takeover fight, but shareholders opposed the decision later that month, which led to the firm reopening the bidding process.

IHH shares closed one cent up at $2.02 after a short trading halt earlier in the day.

A version of this article appeared in the print edition of The Straits Times on July 14, 2018, with the headline 'IHH wins long bidding war for India's Fortis'. Print Edition | Subscribe