IHH sole contender for Fortis as others drop out
Asia’s largest healthcare group IHH Healthcare key contender to acquire Fortis Healthcare after TPG Capital, General Atlantic drop out owing to differences over valuation
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Mumbai: IHH Healthcare Bhd, Asia’s largest healthcare group, remains the sole contender for acquiring Fortis Healthcare Ltd after TPG Capital Lp and General Atlantic Llc dropped out of the race owing to differences over valuation, according to two people aware of the development.
A deal may value the Fortis hospital chain at $1.8-2 billion (Rs11,600-12,900 crore) or at Rs230-250 per share, said one of the people, both of whom declined to be named. At present, Fortis has a market value of Rs9,993 crore. The firm’s shares closed at Rs193 on BSE on Friday.
IHH Healthcare operates the Parkway Pantai hospitals in Singapore, Malaysia, China, Brunei and the United Arab Emirates. It has a strong presence in India, which it entered in 2015 by buying a 51% stake in Hyderabad-based Continental Hospitals Ltd for Rs300 crore and a 74% stake in Global Hospitals Pvt. Ltd, also based in Hyderabad, for Rs1,280 crore.
As of March 2017, Fortis Healthcare Holdings Pvt. Ltd (FHHPL), the holding company controlled by brothers Malvinder Mohan Singh and Shivinder Mohan Singh, held a 52.2% stake in Fortis Healthcare.
“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,” said an IHH Healthcare spokesperson.
A spokesperson for Fortis declined to comment.
“Valuation mismatch has caused the backing out of TPG Capital, which was seeking a value of Rs210 per share, while Singh brothers are keen for Rs230-240 per share,” said the first of the people cited earlier.
TPG Capital declined to comment.
Other private equity firms that had shown interest in acquiring the Fortis hospital chain included KKR and Bain Capital. Global private equity fund KKR and Co. Lp is in talks with the Singh brothers to acquire a controlling stake in Fortis Healthcare, Mint had reported in January.
The Singh brothers are in the process of selling various businesses to reduce the group’s debt, which stood at Rs4,700 crore as of 31 March 2016, up from Rs3,831 crore in June 2015.
A legal battle between Japanese drug maker Daiichi Sankyo Co. Ltd and the Singh brothers remains a hurdle for closing the deal to sell Fortis anytime soon. Daiichi, which claims the Singhs had suppressed material information when they sold Ranbaxy Laboratories Ltd to the drug firm in a $4.6 billion deal in 2008, has approached the Delhi high court for intervention and is blocking the Fortis sale.
In March, the court asked the Singh brothers to seek its approval before selling their stake in Fortis Healthcare.
Daiichi said in court that the brothers were looking to get an investor in Fortis Healthcare and that the sale would dilute assets and hamper its efforts to recover damages from them.
The Delhi high court case relates to enforcement of an arbitral award in proceedings initiated by Daiichi against the Singhs in relation to its 2008 purchase of Ranbaxy, which Sun Pharmaceutical Industries Ltd subsequently bought for $3.2 billion. A Singapore tribunal ordered the brothers to pay a sum of Rs2,562 crore to Daiichi Sankyo in damages. The Singh brothers are contesting this award in the Delhi high court.
Fortis Healthcare earned revenue of Rs4,574 crore at the group level in the last fiscal year; the hospital business’s revenue was Rs3,712 crore. The diagnostics business under SRL Diagnostics Pvt. Ltd, earned revenue of Rs795 crore, according to the company website.