Mumbai: After months of intense negotiations, the board of Fortis Healthcare Ltd late on Tuesday night announced the sale of its hospital assets to Manipal Health Enterprises Pvt. Ltd and buyout firm TPG Capital.
The Fortis Healthcare board has also approved the sale of its 20% stake in SRL Diagnostics to Manipal Hospitals. The resultant entity, Manipal Hospitals, will be a publicly traded company listed on NSE and BSE, Fortis Healthcare said in a statement. Fortis Healthcare will become an investment holding company with a 36.6% stake in SRL Diagnostics.
As part of the proposed transaction, Manipal promoter Dr Ranjan Pai and TPG Capital will invest Rs3,900 crore into Manipal Hospitals.
The funds will be utilized by Manipal Hospitals to finance the acquisition of 50.9% stake in SRL—20.0% from Fortis Healthcare and 30.9% from investors Avigo Capital, Jacob Ballas and International Finance Corp. (IFC), for which discussions are currently underway.
The investment will support the proposed acquisition of hospital assets owned by RHT Health Trust and the growth of the hospitals and the diagnostics businesses, the statement added.
The proposal will be put to vote before shareholders in a special meeting scheduled to be held in the next 30 days.
The deal catapults TPG-backed Manipal Health to pole position among India’s largest hospital chains, with a combined annual revenue of Rs5,400 crore. The combined entity will also become the largest hospital chain in terms of number of beds (around 11,000 against current leader Apollo Hospitals Enterprise Ltd’s 4,550).
“As an organization, we are thrilled with this transaction as it enables us to take the next bold step into our future," said Fortis Healthcare CEO Bhavdeep Singh on the Fortis-Manipal deal. “We believe Manipal has built a terrific franchise and team and the coming together of our two organizations will be transformational for the healthcare industry."
Pai of Manipal Health 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. 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."
Earlier in the day, Fortis Healthcare said it had received an unsolicited non-binding offer from Manipal Health Enterprises. Fortis said that its board is evaluating the proposal received on 23 March 2018. The board of the company has received an unsolicited non-binding indication of interest from Manipal Health for possible transaction with the company, Fortis Healthcare said in a filing to the BSE. “The said proposal is still under evaluation by the management and no firm decision in this regard has been taken by the board," it had added.
Fortis Healthcare has been without a defined promoter ever since the shareholding of founders Malvinder and Shivinder Singh dropped to a minuscule 0.77% following the sale of their pledged shares by some lenders in February this year. Currently, 80% of Fortis’s shares are with institutional funds and the public while 20% of pledged promoters shares are held by lenders Yes Bank Ltd and Axis Bank Ltd.
In August 2016, 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 listing it separately through a reverse merger with Fortis Malar Hospitals Ltd, a listed unit of Fortis Healthcare.
Mint had reported earlier that bulge bracket PE Funds, including TPG, KKR, Bain and Singapore-Malaysia based IHH Healthcare Bhd were in the fray to acquire a significant stake in Fortis Healthcare.