BackSingh brothers said to seek Rs250/share to sell off Fortis Healthcare
TPG Capital, General Atlantic and IHH Health, Parkway Pantai are in discussions with Singh brothers to buy controlling stake in Fortis Healthcare for Rs250/share and SRL Diagnostics for Rs2,000 crore
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Mumbai: The sale of a controlling stake in hospital chain Fortis Healthcare Ltd and its diagnostics subsidiary SRL Diagnostics Ltd has narrowed to a two-horse race.
Private equity funds TPG Capital and General Atlantic Llc are on one side, while IHH Health Bhd of Malaysia, Asia’s largest healthcare group that operates the Parkway Pantai hospitals, is on the other, two people directly aware of the negotiations said.
KKR and Co. LP and Bain Capital which were previously interested in the deal are no longer in the race, these people said, asking not to be named. Promoters Shivinder Singh and Malvinder Singh want close to Rs250 per share for Fortis Healthcare, the people said. Fortis shares closed on Monday on BSE at Rs209.55.
The people cited above said the deal is likely to close in the next few weeks if the final round of negotiations conclude. “Both bidders have revised their bids and the discussions are in the range of Rs250 per share for Fortis alone, and another Rs2,000 crore for SRL," said one of the two people, adding the overall enterprise value of the deal is likely to be around $3 billion.
TPG, which had earlier made a non-binding offer of Rs4,500 for both assets, has revised it upwards and brought in General Atlantic as a co-investor, the persons cited above added.
Mint was the first to report on 24 April that General Atlantic had entered the race for Fortis, citing people aware of the development.
Under the terms being negotiated, the new buyer will initially buy a 26% stake in Fortis from the promoters, which will be followed by a mandatory open offer to public shareholders. Separately, the buyer will also acquire a controlling stake in unlisted SRL Diagnostics and listed Fortis Malar Hospitals Ltd, (a Fortis subsidiary that runs a hospital in Chennai) from the promoters.
In August, the board of Fortis Healthcare approved the demerger of the diagnostics business—which consists of both its own centres and the 56.4% stake in SRL, which has diagnostics centres across India—and proposed to list it separately through a reverse merger with Fortis Malar Hospitals Ltd, a listed unit of Fortis Healthcare.
After the stake sales, the Singh brothers who currently own a 67.5% stake in Fortis Healthcare will continue to be the single largest shareholders but will cede management control to the new investor, the persons mentioned above said.
While emails sent to Fortis Healthcare and RHC Holding Pvt. Ltd (RHPL), the holding firm for the Religare and Fortis brands, were not answered, an IHH Bhd spokesperson said, “IHH is always looking at various value accretive opportunities. However, it is not appropriate for us to comment on specific transactions and we will update the market if there are any material developments."
A TPG spokesperson declined to comment on the story. GA did not respond to a request for comment.
The final transaction will need the approval of the Delhi high court. In March, the court directed the Singh brothers, former promoters of Ranbaxy Laboratories Ltd, to furnish details of all of their unencumbered assets to ensure the use of such assets to satisfy an arbitral award of over Rs2,562 crore, at a later stage, if required. The court also asked the brothers to approach it in the event of any alteration (dilution/sale) in the status of these assets. The case relates to enforcement of an arbitral award in proceedings initiated by Daiichi Sankyo against the brothers in relation to its 2008 purchase of a majority stake in Ranbaxy, then owned by the brothers.
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