Manipal-TPG revises Fortis valuation to Rs 8,358 crore, says will invest Rs 2,100 crore upfront

According to the terms of the latest offer, Manipal Hospitals will merge with Fortis Healthcare, as against the earlier proposal to demerge Fortis’ hospitals business and merge it with Manipal Hospitals.

Manipal Hospitals is valued at Rs 6,070 crore.

The consortium's upfront investment of Rs 2,100 crore in Fortis’ hospital business will be made through a preferential allotment of shares at Rs 160 apiece. The funds will be used to repay existing loans, address immediate liquidity concerns, and to buy the relevant Indian entities from Religare Health Trust.

To oversee how the Rs 2,100 crore invested through the preferential allotment is utilised, the consortium has proposed appointing its own non-executive directors to Fortis’ board of directors. The number of directors appointed will be proportionate to the stake Manipal-TPG will get in lieu of the money it invests upfront.

Manipal-TPG said the preferential allotment will be contingent upon all regulatory approvals, including that of the Competition Commission of India (CCI).

Ranjan Pai, Chairman of Manipal Education and Medical Group (MEMG), which owns Manipal Hospitals, said the revised offer had more to do with simplifying the structure more than increasing Fortis' valuation.

"Our valuation in the earlier offer was also around Rs 160 (per share), the biggest change is the structure which is more direct into the company. It's a structure that investors have always wanted and liked, that's the feedback we got," Pai told Moneycontrol over the phone.

"From a valuation perspective, we think this is fair value. It provides full funding for the company including RHT and we also taking the obligation of Fortis towards buying out SRL private equity investors," he said.

The revised offer by Manipal-TPG was submitted on Sunday, which was its last day to make use of its right-to-revise option. This is the fourth time that Manipal-TPG has revised the offer for Fortis, after both parties announced a merger deal around the end of March this year.

Malaysia's IHH Healthcare, who is also in the race to acquire Fortis, last week raised its offer by 9.4 percent to Rs 175 per share, compared to its earlier offer of Rs 160 per share, while the Munjal-Burmans raised their bid by 7.2 percent to Rs 172 per share, from Rs 160 earlier. KKR-backed Radiant Life Care made an offer of Rs 165 per share.

Fortis’ board of directors will meet on Thursday to decide on the four binding offers it has received so far.