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Manipal-TPG gets back into Fortis race, values healthcare provider at Rs 180 per share

The Fortis board had recommended Munjal-Burmans bid last week for shareholder approval

May 14, 2018 / 09:41 PM IST
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The Manipal-TPG consortium on Monday sweetened the offer for Fortis Healthcare, valuing the company at Rs 9,403 crore — an increase of 12.5 percent compared to their previous offer — signalling that the game for India's second largest healthcare services provider isn't over.

The latest revision of Manipal-TPG values Fortis at Rs 180 per share, making it the highest bidder. The consortium also said it will invest Rs 2,100 crore upfront as part of the deal.

The rest of the terms remain the same as the previous offer, in which Manipal Hospitals will merge with Fortis Healthcare. In addition, the consortium offered to buy the 30.93 percent stake held by private equity firms in SRL Diagnostics at a price that values the Fortis subsidiary at Rs 3,600 crore.

Manipal-TPG said the merger with Fortis will create an additional synergy benefit of Rs 50 per share in present value terms for Fortis shareholders.

Manipal-TPG bid will be put before shareholders for voting.

Also read: Manipal's Ranjan Pai "very disappointed" with Fortis board's decision to back Munjal-Burman's bid

The Fortis board last week recommended the Munjal-Burmans bid for shareholder approval that offered to invest Rs 1,800 crore at a weighted average valuation of Rs 172 per share.

Malaysia’s IHH Healthcare, which has offered to invest Rs 4,000 crore at valuation of Rs 175 per share, is said to be leading the race, but the board said it decided to give Munjal-Burmans their vote-of-confidence given the “certainty” of the deal.

The decision of Fortis board wasn’t unanimous as three members representing minority shareholders out of the eight-member board voted against the Munjal-Burmans offer.

Fortis' decision sparked controversy as two large institutional shareholders have expressed their unhappiness at the valuation and rival bidders, calling foul play, said they directly will reach out to shareholders with counter bids.

“We have been following developments over the past few days after the announcement by Fortis and have observed, through media reports, the negative reaction of the shareholders to the decision of the Fortis board to accept the Hero (Munjal) and Burman offer,” Manipal-TPG said in the offer statement.

“We also believe that, unlike our offer, the Hero and Burman offer only partially solves the short-term liquidity concerns of Fortis and fails to deliver any long-term benefits to Fortis or solve the larger issues facing Fortis, including in particular, Fortis payment obligation for the acquisition of the relevant India entities from RHT and the exit required to be proved by Fortis to the private equity investors in SRL,” Manipal-TPG said.

Also read: Leading Fortis shareholder against Munjal-Burman's offer, cites low valuation

In light of this, procuring the approval of 75 percent of the Fortis shareholders for Munjal and Burmans offer is likely to be very challenging, aded Manipal-TPG.

The latest offer of Manipal-TPG will be valid till May 29.

“Munjal-Burmans is just a board’s recommendation, until shareholders approve the bid — it’s not a done deal,” said Shriram Subramanian, Founder and Managing Director, InGovern Research, said.

“With EGM expected on May 22 succeeds in removal of four directors who have voted in favour of Munjal-Burmans, the scenario will change,” Subramanian added.

Another analyst tracking Fortis said the Manipal-TPG revised offer has created a situation where the Munjal-Burmans will have to up their offer if they fancy their chance of getting shareholder approval.

Shares of Fortis rose 0.24 percent to close at Rs 148.75 on BSE, the benchmark Sensex gained 0.06 percent to end 35,556.71 points.
Viswanath Pilla is a business journalist with 14 years of reporting experience. Based in Mumbai, Pilla covers pharma, healthcare and infrastructure sectors for Moneycontrol.
first published: May 14, 2018 09:41 pm