TPG Capital-Manipal Hospital Enterprises (MHE) is working towards buying out Fortis Healthcare’s stakes with YES Bank, Axis Bank, Edelweiss Capital and others even as Fortis stock plummeted 13.37% following the deal.
Currently, YES Bank owns 15% shareholding, Axis around 2%, while the balance 21% is held by Edelweiss and others.
Sources told DNA Money that YES Bank has already committed its stake to TPG-MHE and the transaction is yet to happen. Axis Bank too is likely to go along with YES Bank.
On late Tuesday evening, Fortis Healthcare’s board had approved the demerger of its hospital business to be acquired by TPG-MHE, along with 20% stake sale in SRL Diagnostics for Rs 3,900 crore.
Fortis management meantime, sought to scotch talk that deal was undervalued.
Fortis Healthcare CEO Bhavdeep Singh said, “Please don’t form a view, let’s have a conversation, this is not a knee-jerk reaction. It wasn’t a simple or improperly thought out concept. There is a great deal of thought there has gone into it. So I request that no one should think that there is an issue with the value.”
On the possibility of a counter offer, he said, “I don’t know and don’t want to speculate either. I want to focus on one thing that we have announced a strategic option for the business and we think it is a very good option. Want to ensure that we communicate well and get everybody on board.”
When approached, TPG Capital declined to comment.
The value of the combined entity will be Rs 15,000 crore and Ranjan Pai, chairman, Manipal Education and Medical Group, would be the chairman of the new Board.
The resultant entity Manipal Hospitals will be a publicly traded company listed on NSE and BSE, and for every 100 shares of Fortis Healthcare, the shareholder will receive 10.83 shares in Manipal Hospitals.
Kaivaan Movdawalla, director, healthcare consulting, EY India, said, “The key challenge, however, lies in the successful merger of two distinct cultures and operational styles which are individually very strong. This will need a strong leadership team that has the vision for the new entity borrowing from the best of both cultures, rather than one subsuming the other.”
The round of talks between Fortis Healthcare and TPG-MHE has been underway for 18 months now, making it among the longest ever pre-deal discussion. The talks stretched due to issues within Fortis Healthcare and other players like Malaysian IHH Healthcare Berhad and Abu Dhabi’s VPS Healthcare vying for the asset.
“We had been talking with multiple investors over the past 18 months, it’s been gruelling. A lot of time and energy has been spent on that. And we recently had some internal issue with our group and promoter issue as well. It is time for us to get back to do what we are doing best, which is healing patients. With this we are moving forward by working with Manipal and making a great healthcare system.”
However, it will take another 8-12 for the process to be through to secure various statutory approvals.
On the operational front post-merger between the two healthcare entities, Singh cited an example of Time Warner-AOL merger that is considered as biggest disaster in the corporate history and said, “If you think about a merger, any merger, anywhere, they are not assessed based on the day you announce them, a day or week later.”
SEWING A DEAL
- New entity to be worth Rs 15,000 crore; Ranjan Pai would be the chairman of the new Board
- Currently, YES Bank owns 15%, Axis around 2%, the balance 21% is held by Edelweiss and others
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On late Tuesday evening, Fortis Healthcare’s board had approved the demerger of its hospital business to be acquired by TPG-MHE, along with 20% stake sale in SRL Diagnostics for Rs 3,900 crore.
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