Fortis shares up 4%, m-cap rises by Rs 293 crore

Leslie Hanson
July 16, 2018

In a meeting held on Friday, the Board of Directors chose to recommend the binding investment proposal from IHH Healthcare Berhad (IHH) to invest Rs 4,000 crore by way of preferential allotment at a price of Rs 170 per share.

IHH's offer is the third one that Fortis has approved this year, with a previous offer being shot down by shareholders.

Also, it entailed the acquisition of assets of Singapore-listed RHT partially by utilising proceeds of preferential allotment and partially through debt financing and merger of Manipal Hospitals (MHEPL) with Fortis at a valuation attributable to MHEPL of Rs 6,070 crore.

Fortis has struggled with a cash crunch, rising debt, and image problems.

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.

Fortis on the other hand has 45 healthcare facilities, including projects under development, in India, Dubai, Mauritius and Sri Lanka with approximately 10,000 potential beds and over 368 diagnostics centres.

Cyril Amarchand Mangaldas managing partner Cyril Shroff and Mumbai-based corporate partner Ruetveij Pandya advised Fortis Healthcare Limited, according to the firm's press release.

A report by an outside law firm commissioned by Fortis's board found about 4.5 billion rupees was improperly loaned to intermediary companies, which ultimately used the funds to benefit entities linked to the Singhs. Manipal Healthcare Enterprises is from the Indian state Karnataka and was offering 160 INR per share.

"After a period of detailed consideration and evaluation, the board of directors is delighted to announce their approval of the IHH binding proposal", said Fortis Chairman Ravi Rajagopal.

Under terms of the deal, following the 40 billion rupee investment, IHH will then make an open offer to buy up to 26 percent of the shares held by existing shareholders, bringing its total stake in Fortis to between 31 percent and 57 percent, depending on how many shareholders participated in the open offer, the statement said.

Trading of IHH shares was suspended from 9.22am to 2.30 today.

The diligence access and management interaction were offered to all the four bidders, Fortis said. Several directors stepped down from the board as concern mounted over how they had handled the bids. A consortium of two Indian business families and a KKR & Co. -backed firm both dropped out. East Bridge Capital owns around 12 percent stake in Fortis, while Yes Bank own around 15 percent.

Other reports by Iphone Fresh

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