Malaysia’s IHH Healthcare beats Manipal to win bidding war for Fortis

The board of Fortis Healthcare Ltd has accepted a proposal from Malaysia’s IHH Healthcare Berhad to invest Rs 4,000 crore in the Indian hospital chain after a months-long bidding war.

The proposed investment offers a “comprehensive equity solution” that addresses the company’s liquidity requirements and meets obligations towards the acquisition of Singapore’s RHT Trust, Fortis said in a stock-exchange filing.

It also provides an exit to private equity investors of diagnostics arm SRL Ltd, Fortis said.

Fortis said it will make a preferential allotment of shares to IHH at Rs 170 apiece, which is a premium of about 20% to the current market price. IHH will also make a mandatory offer of up to Rs 3,300 crore to buy a stake of up to 26% more in Fortis from existing shareholders.

The transaction is subject to approval from shareholders and the Competition Commission of India.

Fortis had been looking for buyers for more than a year. In late March, it agreed to sell its hospital business to TPG-backed Manipal Health Enterprises Pvt. Ltd. But the decision led to an outcry from some minority shareholders on concerns the TPG-Manipal offer undervalued Fortis. This opened the door for other suitors to bid for the company.

Subsequently, IHH Healthcare, a consortium of Hero Enterprise Investment Office and the Burman Family Office, China’s Fosun International and KKR-backed Radiant Life Care Pvt. Ltd offered to invest in Fortis. As the bidding war intensified, TPG-Manipal, IHH Healthcare, Hero-Burman and Radiant Life revised their offers by one or more times.

On 10 May, the Hero-Burman consortium was selected as the winner of the takeover battle. However, the decision didn’t go down well with a section of the company’s shareholders. Within days of the winning announcement, TPG-Manipal raised the offer to buy Fortis and later extended its validity period. IHH Healthcare also extended the validity period of its offer.

Fortis decided to initiate a fresh process altogether on May 29 as the winning bid of the consortium of Hero Enterprise and the Burman Family Office stood mutually terminated.

For the fresh bidding round, Fortis initially invited proposals by 14 June. However, it first extended the deadline to 28 June and subsequently to 3 July. IHH Healthcare and Manipal Health were the only ones to submit new binding offers for Fortis Healthcare Ltd.