Sunil Munjal-led Hero Enterprise and Dabur's Anand Burman and Mohit Burman have jointly offered to invest Rs 1,800 crore in Fortis Healthcare, upfront.
The board of directors of Fortis Healthcare on Thursday approved the joint offer made by Hero Enterprise Investment Office and the Burman Family for a controlling stake in the company.
This puts an end to the month-and-a-half-long bidding war between multiple parties wishing to acquire Fortis. The winning bid, which belonged to Sunil Munjal and the Burman family, will now be considered by Fortis' shareholders for approval.
"The Board, post having the detailed discussions on the pros and cons of each offer, decided by majority, to recommend the offer of Hero Enterprise Investment Office-Burman Family Office," the Fortis board said in a statement.
Sunil Munjal-led Hero Enterprise and Dabur's Anand Burman and Mohit Burman have jointly offered to invest Rs 1,800 crore in Fortis Healthcare, of which Rs 800 crore will be through a preferential allotment of equity shares at Rs 167 apiece. The remaining Rs 1,000 crore will be invested through a preferential issue of warrants, which would give them the right to buy more stake in the future at Rs 176 per share.
To address Fortis' immediate concerns about liquidity, the Munjal-Burmans consortium will invest Rs 1,050 crore of Rs 1,800 crore, upfront.
The marathon board meet, which has started early morning on Thursday and ended late in the night, witnessed much deliberation on all the binding offers for Fortis Healthcare made by IHH Healthcare, the Manipal/TPG consortium, Radiant Life Care and the Munjal-Burmans consortium.
The board said it had received inputs from the independent Expert Advisory Committee (EAC), financial advisers Standard Chartered Bank and Arpwood Capital, and legal advisers Cyril Amarchand Mangaldas, before making the final choice.
"We are delighted that the board has accepted our offer, which is, unarguably, the best solution," said Sunil Munjal, Chairman of Hero Enterprise.
"We are sure that the shareholders will see the intrinsic value in our proposal and repose confidence in us. As long-term investors, we are committed to help make Fortis the finest healthcare institution in the region, and create value for all stakeholders," Munjal said.
The Burmans too, welcomed the Fortis board's decision.
"Fortis is a national healthcare asset, which has a good spread across the country and we hope to help the company become what it ought to be. Going forward, the immediate plan of action for the Company should be to build on its strengths, retain talent, expand business, and institutionalise processes at Fortis," said Anand Burman, Chairman of Dabur India.
Hero and Dabur are among India's large corporate groups. Although they do not directly run hospitals, both groups are associated with healthcare. While Munjal is the President of the 1,500-bed Dayanand Medical College and Hospital in Ludhiana, the Burman family has successfully built large-scale healthcare enterprises including Dabur Pharma, HealthCare at HOME and Oncquest.
JM Financial was the financial advisor to the Munjal-Burmans consortium for the deal.
What sealed the deal?
One of the possible reasons that could have turned the tide in favour of the Munjal-Burmans consortium, is that apart from being a competitive offer, it was a simple one that was easy to implement.
The consortium proposed to invest Rs 1,800 crore directly into Fortis without any due diligence, documentation, walk away clauses or expectations of change in structure. As an icing on the cake, they assured to implement the offer in 45-60 days.
Other offers would have needed approvals from several regulatory agencies, which would have taken months to come by.
What about SRL and buying Religare Health Trust's assets?
The Munjal-Burmans consortium proposed to divest Fortis' stake in SRL Diagnostics through an independent competitive sale process. Fortis holds 56.6 percent stake in SRL, while private equity investors hold around 31 percent and the rest is held by other shareholders.
As for buying hospital assets held by Religare Health Trust, they said plan-A was to use the proceeds of the SRL stake sale to fund the acquisition, while the rest of the cost will be met by funds raised through a rights issue.If the SRL stake sale doesn't materialise, plan-B is to go for a larger rights issue to fund the acquisition.