MUMBAI • India's Fortis Healthcare has accepted an offer of investment from two prominent business families, picking an underdog in a five-way battle for a piece of the promising yet cash-strapped hospital operator.
Hero Enterprise Investment Office and Burman Family Office will become Fortis' largest shareholder with an investment of 18 billion rupees (S$357 million), valuing the firm at about 90 billion rupees. Their offer was alone in excluding due diligence as a precondition, giving Fortis quick access to the funds.
The decision ends a bidding war to buy part or all of Fortis, which operates about 30 private hospitals in India and is in need of cash after an aggressive period of expansion.
The contest attracted deep-pocketed suitors seeking to capitalise on a lucrative private healthcare market that is expected to get a boost from a government plan to expand an insurance programme to half of India's 1.3 billion people.
Hero Enterprise is an investment unit of Mr Sunil Munjal, whose family runs India's largest motorcycle maker, Hero MotoCorp. Burman Family Office is the private investment arm of the family that controls consumer goods company Dabur India.
After the investment, Hero-Burman will together own just under 20 per cent of Fortis, including the 3 per cent they already own, Mr Munjal said at a televised news conference yesterday.
"We believe the reasons for considering this offer could be no requirement of due diligence and lesser equity dilution as compared to other offers," ICICI Securities analyst Sriraam Rathi said in a research note, and expects the offer to receive shareholder approval.
The consortium has offered to invest 8 billion rupees through a preferential share issue at 167 rupees apiece, and 10 billion rupees via preferential issue of warrants at 176 rupees each.
Fortis received four binding offers out of five, of which industry experts saw as favourites domestic rival Manipal Hospitals and backer TPG Capital Management, as well as Malaysia's IHH Healthcare.
IHH, which had offered 175 rupees a share for a 40 billion rupee investment, said it was disappointed with the decision. "We are open to further discussions with all stakeholders, and look forward to the support of Fortis shareholders," IHH chief executive Tan See Leng said in a statement.
Fortis has been struggling with insufficient cash and growing debt, at a time when regulators are investigating allegations that its founders took funds without board approval. The founders, who have since left Fortis, deny wrongdoing.