TPG-backed Manipal Hospitals buys Fortis Healthcare, to invest Rs 3,900 crore

The funds will be utilised by Manipal Hospitals to finance the acquisition of 50.9 percent stake in SRL.

In addition, the investment will support the proposed acquisition of hospital assets owned by RHT Health Trust (RHT) and the growth of the hospitals and the diagnostics businesses.

Manipal Hospitals, part of Manipal Education and Medical Group, promoted by Ranjan Pai and has been backed by US-based PE firm TPG .

The combination of Manipal Hospitals and Fortis Hospitals will result in the creation of the largest provider of healthcare services in India by revenue with 41 hospitals, 4 hospitals overseas and 11,000 plus installed bed capacity (including teaching hospital beds of Manipal Hospitals).

It will have a staff pool consisting of 4,200 doctors, 9,300 nurses and 11,400 other employees across India.

The hospitals’ complementary geographic footprints and combined clinical strengths will provide significant scale, revenue and cost synergies.

The proposed transaction is subject to shareholders’ approval, creditors’ approval, applicable regulatory approvals (including Competition Commission of India, SEBI, stock exchanges and National Company Law Tribunal (NCLT)) and other customary conditions precedent.

"As an organisation we are thrilled with this transaction as it enables us to take the next bold step into our future," Bhavdeep Singh, Fortis Healthcare CEO said

"Much has transpired over the past 12-18 months at Fortis and in the healthcare industry at large; it’s now time to get back to working with our doctors and nurses to saving and enriching lives. We believe Manipal has built a terrific franchise and team and the coming together of our two organisations will be transformational for the healthcare industry,” Singh said.

"The companies make a compelling strategic fit in terms of complementary geographies, clinical strengths as well as a shared commitment to providing outstanding patient care. As the largest hospital operator in India, this will be a platform benefiting all, from the communities we serve, to our capable employees and our investors. We have an excellent opportunity to leverage this strength to expand coverage and service delivery, in response to the burgeoning demand for world class healthcare," Ranjan Pai, Chairman of Manipal said.

Merger Terms

Upon obtaining all approvals, when the demerger becomes effective, for every 100 shares of Fortis Healthcare (FHL) held by a shareholder, the shareholder will receive 10.83 shares in Manipal Hospitals (i.e.  the resultant combined hospitals business).

Walker Chandiok & Co, the independent valuer jointly appointed by FHL and Manipal Hospitals, has recommended the share exchange ratio, which has been accepted by the respective boards of FHL and Manipal Hospitals. Karvy Investor Services provided a Fairness Opinion to FHL on the share exchange ratio given the underlying value.

In light of the proposed transaction, and post the shareholders approval, the current scheme of demerger of SRL will be withdrawn, FHL said in a statement.

Manipal Hospitals will acquire a 50.9 percent stake in SRL (20.0 percent stake from Fortis and 30.9 percent stake from other investors in SRL for which discussions are currently underway). FHL will continue to hold 36.6 percent of SRL and the remaining 12.5 percent stake in SRL will be held by existing investors (including management).