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IHH outbids Manipal-TPG to takeover cash-strapped Fortis

As per the proposal chosen by Fortis Healthcare’s Board, IHH will make an investment of Rs 4,000 crore at Rs 170 per share.

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Malaysian IHH Healthcare Berhad has been selected over Manipal Health Enterprise-TPG Capital consortium to takeover cash-strapped Fortis Healthcare Limited.

As per the proposal chosen by Fortis Healthcare’s Board, IHH will make an investment of Rs 4,000 crore at Rs 170 per share. This share price offer is at a 20% premium to the existing market price.

Ravi Rajagopal, Chairman, Board of Directors at Fortis Healthcare said, “After a period of detailed consideration and evaluation, the Board of Directors is delighted to announce their approval of the IHH binding proposal. The IHH proposal offers a more strategically and financially compelling proposition along with simplicity and certainty.”

Apart from offering Rs 4,000 crore, IHH’s proposal also had a mandatory open offer to the public shareholders of Fortis Healthcare as well as Fortis Malar Hospitals. IHH will buy 26% stake from the open market for a price higher than Rs 170 per share being offered to the company. There is also a plan to refinance Fortis Healthcare’s debt to the extent of Rs 2,500 crore.

“Funds infused will be used towards completion of the acquisition of assets of RHT, SRL private equity minority shareholders short-term liquidity needs,” read Fortis Healthcare’s statement. Whereas, MHE-TPG made a proposal to infuse Rs 2,100 crore at a price of INR 160 per share and acquire stake held by private equity investors in SRL by Manipal Hospitals for a consideration of Rs 1,134 crore.

The bid also mentioned the acquisition of assets of RHT partially by utilising proceeds of preferential allotment and partially through debt financing apart from merging Manipal Hospitals with Fortis Healthcare at a valuation of Rs 6,070 crore and a rights issue or a QIP post the merger to repay the bridge funding raised to complete acquisition of assets of RHT.

Reasoning out the factors that led to selection of IHH over MHE-TPG, Fortis Healthcare’s Board stated that the bid price is not only highest but also “offers significant deal certainty given a simpler transaction structure and requirement for fewer approvals and a shorter timeframe” apart from providing exit opportunity for shareholders through the open offer.

The transaction is expected to be completed within seven business days of receipt of shareholder’s and Competition Commission of India’s approval which will be obtained concurrently with shareholder’s approval and can take approximately 60-75 days.

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